Difference between ACH and wire transfer
ACH and wire transfer:
While both ACH and wire transfer serve the same purpose of transferring funds from one place to another, opinions differ regarding the benefits and also the downsides of these two methods. Therefore, for the benefit of those who are bewildered between these two methods, this article seeks to define what each of these terms mean and how different they are from one another which in turn ill help those who just cannot seem to make up their mind about both.
What is ACH?
ACH which stands for Automated Clearing House refers to the electronic network of financial institutions in the US which was thus created for the process of electronically automating a scheduled direct deposit, payment, or transfer of funds. ACH typically deals with business-to-business transactions, payroll services and government payment of Social Security benefits. This process is constantly under the monitoring of the NACHA (National Association of Automated Clearing Houses) and state or regional associations which have set of certain rules and regulations regarding the transfers. Since the processing of these requests are done in batches, the ACH transfers may take about 2-4 days to process.
What is wire transfer?
Wire transfer is a popular form of money transferring which is usually done so from one bank to another. It is done in real time and goes through the Federal reserve directly and it is considered a relatively secure form of money transferring since both account holders possess clear identities and also because of the fact that no actual cash is involved as it only makes use of electronic balances. Wire transfer is the preferred way of transferring funds of the people in cases of emergency money transfers even though it may be more expensive than other methods available.
What is the difference between wire transfer and ACH?
While ACH transfers are known to take from 1-4 days to process, wire transfers go directly through the Federal Reserve and process almost immediately. Therefore, wire transfer remains the preferred choice of money transferring method of many people who are keen on getting their money transferred quickly.
The wire transfer is considered a much safer choice because of its more personalized manner of handling matters. In order for a wire transfer to occur, both the account holders should have verified and identified accounts. And also, while ACH deals with transaction between businesses mostly, wire transactions take place between two individuals. Which make wire transfers more popular with the general public whereas ACH is more popular in the corporate world.
While wire transfers cost more, ACH transfers are much cheaper. While certain firms handle ACH transfers for free banks may charge a nominal fee whereas one has to pay a rather large amount for a wire transfer.
And yet in certain cases, wire transfer may become an unsafe method to use. For example, when making online purchases, the seller may assume a fake identity and after the payment has been done, there is a possibility that the buyer may not get the goods as promised. ACH proves to be a much safer choice in terms of online purchasing as in order to use the ACH, an institution needs to register in to the ACH network which provides lesser room for frauds than in the case of wire transfers.