Finance

ACH Transfers vs. Wire Transfers: What’s the Difference?

ACH and wire transfers are two of the most common ways to send money from your bank account electronically. There are several differences between each delivery method, including delivery speed, cost, and transaction limits. 

For example, you may need to send a final loan payoff by wire instead of ACH so the lender can receive a same-day payment. However, many apps may default to ACH transfers to minimize transaction fees.

This ACH vs. wire transfer comparison looks at the advantages of each method and how each cash delivery option works.

Table of Contents
  1. What Is an ACH Transfer?
    1. Examples of ACH Transfers
    2. ACH Processing Times
    3. ACH Transaction Limits 
    4. ACH Fees
    5. Is an ACH Transfer the Same as a Direct Deposit?
    6. Is ACH and Zelle the Same?
    7. Is PayPal an ACH Transfer?
    8. What Banks Accept ACH Transfers?
  2. What Is a Wire Transfer?
    1. Examples of Wire Transfers
    2. Do All Banks Accept Wire Transfers?
    3. Wire Transfer Speeds
    4. Wire Transfer Fees
    5. Wire Transfer Limits
  3. ACH Transfers vs. Wire Transfers
  4. Final Thoughts

What Is an ACH Transfer?

Automated clearing house (ACH) transfers are the default electronic transfer method for bank-to-bank transfers and to pay bills or receive direct deposits. Banks and credit unions utilize this transfer method and the National Automated Clearing House Association (Nacha) governs ACH transactions from U.S.-based banks and credit unions. 

There are two different ACH transaction types: 

  • ACH credit: When your funds are deposited into your bank account by electronic transfer. For example, your employer pays you, you redeem cash back credit card rewards, or you transfer money from a bank account to an investing account.
  • ACH debit: Funds are withdrawn from your banking account to pay bills, fund a digital wallet, or send money to friends and family. One example is sharing your banking details with a utility company to pay your bills automatically and never forget a monthly due date. 

The U.S. ACH network is open 23 ¼ hours on business days. Payments are settled four times daily when the Federal Reserve settlement system is available. For reference, the Fed system is only closed from 6:30 p.m. to 7:30 a.m. Eastern on business days, plus all day on holidays and weekends.

You will provide your bank’s routing number and personal account number to initiate transfers. 

Examples of ACH Transfers

Several ACH transfer examples include:

  • Receiving employer paychecks or government benefits
  • Recurring auto-pay utility bill payments
  • Transferring money to another bank account in your name (i.e., from Chase Bank to Bank of America or a credit union)
  • Scheduling bill, loan, and credit card payments
  • Sending charity donations

Further, money-sending apps like Cash App, PayPal, Venmo, and Zelle will likely use ACH transfers to send funds to linked bank accounts in your name.    

ACH Processing Times

ACH transfers can take two to five business days to complete, although Nacha estimates that 80% of transactions take one day or sooner. 

The funds don’t go directly from your bank to the recipient’s bank, as it’s expensive and complicated for banks. Instead, banks have been partnering with an independent clearing house since the 1960s to complete the behind-the-scenes work.  

To be fair, ACH electronic funds transfer technology is making notable improvements to improve transfer speeds. Some banks partner with money-transfer apps that can make free same-day or next-day transfers as the financial institution can verify account balances. Same-day ACH transfer capability went live in 2016.

ACH Transaction Limits 

The inbound and outbound ACH transfer limits vary by bank or credit union to limit fraud, account overdrafts, and network congestion. Going a step further, premium accounts for high-net-worth clients and businesses typically have higher daily and weekly limits.

Here are the standard ACH transfer limits:

  • Daily limits: $5,000 to $10,000 per day
  • Monthly limits: $10,000 to $20,000 per month

The above limits usually affect you when you withdraw money or pay bills. There can also be a maximum transaction size. I can only schedule a $5,000 per-day credit card payment when using an external account, but your limits can be higher or lower.

Established banking customers may qualify for higher transfer limits and fee waivers as a relationship perk. 

Some banks publish the transfer limits in the deposit account agreement. However, you will usually need to call customer service to research the latest limits. Low limits may encourage you to have multiple checking accounts or avoid banks with low thresholds. 

While each financial institution can set its own daily, weekly, and monthly transaction limits, they are ultimately bound to the Nacha operating rules. These guidelines are fairly flexible. A prime example is raising the same-day ACH debit limit from $100,000 to $1 million in 2022.

ACH Fees

ACH transfers are usually free to individuals and customers, but the recipient may pay a fee. Nacha charges a per-entry fee of $0.000185 per ACH transaction clearing on the national ACH network, although banks usually absorb this cost.

However, a handful of national banks may charge a fee between $3 and $10 for next-day ACH delivery or to initiate a transfer at a local branch or over the telephone. 

You may also pay third-party payment processing fees to send or receive money. As a personal example, the payment processor charges a 1% processing fee for ACH transfers and 3% for credit card payments when I send money to one of my favorite charities. Either I or the organization pays this fee.

Another fee is for peer-to-peer payment app digital wallet instant transfers to receive money in 30 minutes or less to a linked checking account or debit card. For example, you may use PayPal or Venmo and need money now instead of tomorrow or the day after. You might pay 1.75% for the convenience.     

Is an ACH Transfer the Same as a Direct Deposit?

Direct deposits are a type of ACH transfer sent from employers, government benefit providers, or another payer. These deposits are usually required to qualify for bank account signup bonuses and waive ongoing monthly service fees.

Peer-to-peer transfers from Cash App, PayPal, and Venmo are generally not treated as direct deposits even though you get paid similarly via ACH since the money usually comes from friends or family instead of an organization. Thankfully, not all bank account bonuses have direct deposit requirements.  

Is ACH and Zelle the Same?

Not exactly, as Zelle is a peer-to-peer money transfer app that uses the ACH network to complete transactions. Zelle transfers can finish within minutes or by the next business day, particularly between banks and credit unions integrating the app.

It’s also possible to send money to a bank that’s not a Zelle member. However, the transaction takes place as an ACH transfer, although it can take a few more business days. 

Be aware there are daily and monthly Zelle pay limits.   

Is PayPal an ACH Transfer?

Yes, PayPal and similar PayPal alternatives complete transactions by ACH when you cash out or add funds, including instant transfers.  

What Banks Accept ACH Transfers?

Almost all banks, credit unions, and fintech banking apps accept ACH transfers as it’s the most affordable and secure method in most situations. A third-party app like Plaid will connect to your account to facilitate a transfer request.

While ACH transfers are not always the fastest, they are still preferred to wiring money, buying a money order, or writing a check.

What Is a Wire Transfer?

A wire transfer is an electronic funds transfer system used by banks and other transfer agencies worldwide. Wire transfers are quicker than ACH transfers as you send money directly to another financial institution and bypass the clearinghouse. It’s the equivalent of paying for USPS Priority Mail instead of first class to have a guaranteed delivery date and enjoy faster delivery speeds. 

There are three different types of wire transfers:

  • Domestic transfers: Send money to another U.S. recipient.
  • International transfers: Send money outside the United States.
  • Remittance transfers: Individuals transfer money to other individuals outside the United States. This transfer type can offer more protection than a traditional outgoing international wire transfer.

Western Union began offering this expedited service using its telegraph network in 1872. There are many wire transfer services today, including banks, credit unions, and third-party transfer apps like Wise

You may need to visit a local branch or call an agent to make a wire transfer as you will need specific information, including:

  • Recipient’s name, account number, and routing number
  • The recipient’s bank name, address, and phone number
  • Cash if you’re not funding it from a linked account

You can wire money domestically or internationally. While there is room for potential scams by sending money to strangers, this is a trustworthy method for sending large amounts of money to loved ones or for high-profile business transactions.

For example, I have wired funds to pay off a mortgage as that was the servicer’s preferred method. You may also need to wire funds to open an investment account, make a security deposit, or finish a business deal while exchanging a large sum of money.

If you’re receiving money, the sender or payment platform may offer wire transfers to receive your funds sooner. But watch out for extra fees. In fact, Escrow.com requires sellers to accept payment by wire transfer for transactions exceeding $500,000. I used this platform to sell a business for a small amount and could choose between ACH and wire deposit. 

Examples of Wire Transfers

Here are some of the most common reasons to send money by wire or receive an income wire transfer:

  • Close on real estate transactions
  • Complete domestic or international business transactions
  • Fund or close financial and investment accounts
  • Pay merchants or employees overseas
  • Send money overseas to friends or family (for quicker funds availability)

You’re unlikely to see a wire transfer option for most daily transactions, including scheduling bill payments, enrolling in autopay, or receiving electronic paychecks. 

Do All Banks Accept Wire Transfers?

Most banks and credit unions accept incoming wires and offer outgoing wires as well. Certain online-only banks don’t provide outgoing wires to minimize operating costs, and ACH debits might be your only withdrawal option for sizable transactions. 

Further, peer-to-peer money apps are hit-and-miss with handling wire transfers. For example, Cash App won’t process wire transfers, but PayPal will, as they have more expansive payment processing capabilities for domestic and international transactions through Xoom. 

You can learn more about sending money on PayPal here.

Wire Transfer Speeds

Most domestic wires finish on the same day. However, there can be cut-off times to receive same-day funding. For example, a personal loan lender may need you to accept your loan agreement by 12 p.m. Eastern.

International wire transfer speeds differ by country and dollar amount. It can take a few business days for the recipient to receive the funds. 

Wire Transfer Fees

Unlike ACH transfers, which are almost always fee-free, wire transfer fees are standard. Depending on the financial institution, incoming wires can be free, but sending a wire usually costs money.

Here is an example of how much you might pay for wire transfers:

  • Incoming wires (domestic and international): $0 to $15
  • Outbound domestic wires: $0 to $30
  • Outbound international wires: $5 to $50 

If you anticipate completing bank wire transactions regularly, use our guide to find the cheapest wire transfer fees

You may also consider upgrading to a premium checking account service if you can satisfy the account minimums and monthly activity requirements, as you can enjoy reduced or waived fees. Private client bank accounts are the most likely to offer free wire transfers.

Wire Transfer Limits

Many financial institutions and transfer apps encourage making wire transfers instead of ACH transfers by limiting single ACH transfers to $10,000 or less. Rather, a single wire transfer can be as big as $100,000.

Anticipate having to complete additional paperwork for any bank draft exceeding $10,000. Similar reporting requirements may activate when transferring an equivalent amount over a short period. The IRS transaction reporting requirements apply to domestic and international transfers.

As a result, wire transfer services may have lower maximums to prevent additional paperwork and fees.

In addition to maximum transfer limits, banks and credit unions require a minimum account balance to cover any associated fees. They will reduce the wire balance to cover the fee.

Below is a head-to-head comparison of the similarities and differences between ACH and wire transactions.

ACH Transfers Wire Transfers
Best For Paying bills, receiving direct deposits, sending money to friends domestically Overseas payments, large business transactions, loan down payments, remittances
Transfer Limits $5,000 to $10,000 per day (varies by institution) Up to $100,000 per day (varies by institution)
Transaction Fees Usually free, but expedited transfers can cost $3-$10 Up to $15 for incoming wires and up to $50 for outgoing
Geographic Restrictions Overwhelmingly for domestic transfers but international ACH transfers are possible Domestic and international. Many overseas transfers are wire-based
Reversibility Can only be reversed due to bank errors or if the recipient hasn’t accepted it yet Transfers are final except for bank-related errors.

Final Thoughts

ACH and wire transfers help you send or receive money quickly and securely using your bank account of choice. There are many banks, credit unions, and personal finance apps that make it easy and affordable to transfer money. 

The best place to start might be your current bank, but you may need to switch to avoid fees or have higher transaction limits. You may consider comparing bank bonuses if you’re ready to switch platforms and gain more access to your cash reserves. 

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About Josh Patoka

After graduating in $50k with student loans in May 2008 from Virginia Military Institute with a B.A. International Studies and Political Science with a minor in Spanish (he studied abroad in Sevilla, Spain for 3 months), Josh decided to sell his soul for seven years by working in the transportation industry to get out of debt ASAP and focus on doing something else with a better work-life balance.

He is a father of three and has been writing about (almost) everything personal finance since 2015. You can also find him at his own blog Money Buffalo where he shares his personal experience of becoming debt-free (twice) and taking a 50%+ pay cut when he changed careers.

Today, Josh relishes the flexibility of being self-employed and debt-free and encourages others to pursue their dreams. Josh enjoys spending his free time reading books and spending time with his wife and three children.

Opinions expressed here are the author’s alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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