Difference Between ACH and Wire Payment

ACH stands for Automatic Clearing House Payments. In this mode, payments are made directly person-to-person or by direct deposit.

Wire payment is the electronic method of transferring funds from one source to another. It can be initiated bank to bank via a network like Swift or a Fed wire.

Key Takeaways

1. ACH (Automated Clearing House) is a batch processing system for electronic financial transactions, with transactions grouped and processed at specified intervals; wire payments are electronic fund transfers sent through a network of banks or transfer agents, providing near-instant and irrevocable transfers.
2. ACH transactions are generally lower in cost but slower in processing time, while wire payments offer speed and finality but come with higher fees.
3. Both ACH and wire payments facilitate electronic fund transfers. Still, ACH is more suitable for everyday transactions and recurring payments, whereas wire payments are ideal for time-sensitive, high-value transfers that require immediate settlement.

ACH vs Wire Payment

ACH stands for Automated Clearing House, it is a batch processing system that is used for electronic transfers of funds between banks, are used for low-value transactions and can take up to a few business days to complete. Wire transfers are real-time transfers of funds between banks.

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Comparison Table

Parameter of Comparison	ACH	Wire Payment
Concept	In 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 Speed	In ACH, transfers usually take two to three days to complete.	In Wire payment, transferring the funds takes a maximum of 1 day.
Certainty and safety	ACH transfers are pretty safe, but ACH transfers can be reserved for your account.	It is a relatively safe and secure way to get paid.
Cost	ACH transfers are almost free to customers. Only maintenance fee costs.	Wire payment charges between 10 dollars to 35 dollars to send payments.
Common Uses	1. Employee wages 2. Recurring bills 3. One-off payments	1. Speedy Payments 2. Property down payments

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What is ACH?

ACH stands for Automatic Clearing House Payments. It is an electronic funds transfer system that moves money between bank accounts.

How does an ACH payment work?

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

What are the common examples of ACH payments? 

1. Direct deposit of your wages.
2. Automatic payment of bills such as the energy bill.
3. 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. It can be initiated bank to bank via a network like Swift or a Fed wire.

How does Wire payment work?

1. The person who wants to send money goes to a Remittance service provider and enters the bank and the receiver’s details.
2. The bank gives the sender a deposit slip.
3. The sender submits a wire transform form to the local bank to start the transaction process.
4. Local bank transfers funds to their corresponding bank.
5. The corresponding bank transfers money to the Remittance service provider.
6. Ultimately, the receiver receives the money from the Remittance service provider.

What are the common examples of Wire payments? 

1. Property down payments.
2. Speedy payments.

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Main Differences Between ACH and Wire Payment

1. The significant difference between ACH and Wire payment is that, in ACH, the transfers can take two to three days to clear the price, but in Wire payment, it is quick; it takes only a couple of hours to clear the cost.
2. 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.
3. In ACH, one can send and request payments, whereas, in Wire payment, one can only send payments.
4. ACH transfers are very much accessible to customers. Only maintenance fee costs, whereas Wire payment charges between 10 dollars to 35 dollars to send payments.
5. ACH payments are more secure as compared to Wire payments.
6. There is no human intervention in ACH payments, whereas bank workers and employees complete Wire payments. 

References

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