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Difference Between ACH and Wire Payment

Table of Contents

ACH stands for Automatic Clearing House Payments. In this kind of mode, payments are made directly person-to-person or by direct deposit. An ACH payment is held in ACH approved financial institution or bank for two to three days before it clears though some banks are working on doing that a bit quicker and having it turn around in one day.

Wire payment is the electronic method of transferring funds from one source to another source. It can be initiated bank to bank via a network like Swift or a Fed wire. Western Union was the first company to make a wire payment. It is a very fast and safe mode of transfer.

ACH vs Wire Payment

The main difference between ACH and Wire payment is that in ACH, the transfers can take two to three days to clear the payment, but in Wire payment, it is quick, it takes only a couple of hours to clear the payment.

 

Comparison Table Between ACH and Wire Payment (in Tabular Form)

Parameter of ComparisonACHWire Payment
ConceptIn ACH, payments are made directly person-to-person or by direct deposit.In Wire payment, funds are transferred from one bank to another to make payments.
Transfer SpeedIn ACH, transfers take usually two to three days to complete.In Wire payment, it takes a maximum of 1 day to transfer the funds.
Certainty and safetyACH transfers are quite safe but ACH transfers can be reserved into your account.It is relatively a safe and secure way to get paid.
CostACH transfers are almost free to customers. Only maintenance fee costs.Wire payment charge between 10 dollars to 35 dollars to send payments.
Common Uses1. Employee wages
2. Recurring bills
3. One-off payments		1. Speedy Payments
2. Property down payments
 

What is ACH?

ACH stands for Automatic Clearing House Payments. It is an electronic funds transfer system that moves money between bank accounts. An ACH payment is held in ACH approved financial institution or bank for two to three days before it clears though some banks are working on doing that a bit quicker and having it turn around in one day. ACH transfers are quite safe but ACH transfers can be reserved into your account.

How does an ACH payment work?

  • One wants to collect an ACH payment from a customer.
  • He receives authorization from the customer.
  • Bank connects directly to the ACH processor.
  • The processor receives the transaction data and forwards it to the customer’s bank.
  • Your customer’s bank receives the transaction.
  • The customer and the processor verify whether the submitted information is correct.
  • The processor distributes the ACH file to your bank.
  • Your bank posts payment to your account.

    • What are the common examples of ACH payments? 

  • Direct deposit of your wages.
  • Automatic payment of bills such as the energy bill.
  • Payments from businesses to vendors and suppliers.
    •  

    What is Wire Payment?

    Wire payment is the electronic method of transferring funds from one source to another source. It can be initiated bank to bank via a network like Swift or a Fed wire. Western Union was the first company to make a wire payment. It is a very fast and safe mode of transfer. It is relatively a safe and secure way to get paid. Wire payment charge between 10 dollars to 35 dollars to send payments. In Wire payment, it takes a maximum of 1 day to transfer the funds.

    How does Wire payment work?

  • The person who wants to send money goes to a Remittance service provider enters the bank and the receiver’s details.
  • The bank gives the sender a deposit slip.
  • The sender submits wire transform form in the local bank to start the transaction process.
  • Local bank transfers funds to its corresponding bank.
  • The corresponding bank transfers money to the Remittance service provider.
  • In the end, the receiver receives the money from the Remittance service provider.

    • What are the common examples of Wire payments? 

  • Property down payments.
  • Speedy payments.

    • Main Differences Between ACH and Wire Payment

  • The major difference between ACH and Wire payment is that, in ACH, the transfers can take two to three days to clear the payment, but in Wire payment, it is quick, it takes only a couple of hours to clear the payment.
  • In ACH, payments are made directly person-to-person or by direct deposit whereas, in Wire payment, funds are moved from one bank to another within one business day.
  • In ACH, one can both send and request payments whereas, in Wire payment, one can only send payments.
  • ACH transfers are very much free to customers. Only maintenance fee costs whereas Wire payment charges between 10 dollars to 35 dollars to send payments.
  • ACH payments are more secured as compared to Wire payments.
  • In ACH payments, there is no human intervention whereas Wire payments are completed by bank workers and employees. 
    •  

    Conclusion

    ACH is an electronic funds transfer system that moves money between bank accounts. ACH payment makes direct deposit work and Wire payments are the payments in which In Wire payment, funds are transferred from one bank to another to make payments. The similarity between both methods is that both move funds from one bank to another bank.

    If we compare both the methods of payment, we can see that Wire payment is a more used and more familiar method of transferring funds to the ACH payment. But low cost and low-risk factors make ACH a good and attractive option. In ACH, one can both send and request payments whereas, in Wire payment, one can only send payments.

    In ACH, the transfers can take two to three days to clear the payment, but in Wire payment, it is quick, it takes only a couple of hours or maximum a day to clear the payment.

    References

  • https://www.degruyter.com/view/journals/rne/2/2/article-rne.2003.2.2.1024.xml.xml
  • https://fraser.stlouisfed.org/files/docs/publications/frbclevreview/pages/1995-1999/68731_1995-1999.pdf
  • https://www.ingentaconnect.com/content/hsp/jpss/2016/00000010/00000003/art00003

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