The difference between ACH and wire transfers: which option to choose?

Money transfers are integral to any person that uses the financial services of banks or payment service providers. 

It is no wonder that there are many types of transfers, such as ACH or wire payments. So, our team at Genome decided – why not explain what ACH and wire transfers are and the difference between wire transfers and ACH? Let’s get to the bottom of this right away!

What you need to know about the ACH bank transfer

The ACH money transfer is an electronic payment method made with the help of the Automated Clearing House network. This way, the card brands like Visa and MasterCard don’t participate in the payment process. The payment is transferred between banks and works within the United States of America exclusively. Note that some other countries have their own clearing houses, but in this article, we solely focus on the American ACH Network. 

The Automated Clearing House Network started functioning in the US in 1970th. Multiple people use ACH, as in 2021, the network processed over 29 billion payments. 

To better understand the difference between ACH and wire transfers, let’s go through the types of ACH transfers and how such payments are made.

The two kinds of ACH payments 

Direct deposit. It is an ACH bank transfer that allows depositing money into a client’s account. So, the payment is made from the sender to a beneficiary. For instance, a customer transfers funds to an online shop, or an employer pays a salary to a staff member. Direct deposits are commonly used for paychecks, tax refunds, social security benefits, annuity, and interest payments. 

Direct payment. This ACH payment is initiated by the receiver of money, which is pulled from the person’s account. As you can imagine, direct payments are usually utilized for recurring transactions, for instance, when the service charges you a monthly subscription. 

How to make an ACH bank transfer

When comparing an ACH vs. a wire transfer, one of the most prominent differences is how they are carried out. Let’s go through the complete process:

1. Let’s say you want to send an ACH money transfer online. It makes you the originator – an individual or a business that initiates the ACH bank transfer. As an originator, you need to receive authorization from the receiver of funds to initiate the payment and allow for pulling money from your account.
2. The originator gathers all the data required for the ACH money transfer (such as the recipient’s account details, routing number, and transaction type). 
3. The originator then sends listed payment instructions to their bank or financial institution, which is called the Originating Depository Financial Institution (ODFI), if it takes part in the ACH transferring process. The ODFI receives the originator’s ACH money transfer and batches it with other ACH payments from other clients it received during the day. 
4. The ODFI redirects the whole batch of ACH bank transfers, including yours, to the ACH Operator, a central clearing facility that processes ACH payments. There are two of these operators: the Federal Reserve Bank and the Electronic Payments Network (The Clearing House). 
5. Once the ACH Operator processes the batch of ACH money transfers, it sends it to Receiving Depository Financial Institution (RDFI), which is another name for the beneficiary’s financial institution.

And that’s how you can send an ACH payment online. To get to our ACH vs. wire debate, we need to understand what wire transfers are. 

Wire transfers: what are they?

Wire transfers are methods of sending money between accounts that do not require physical cash and involve financial institutions and money transfer systems. It is a very broad term that can refer to many electronic payments and transfer methods. For instance, some classify ACH payments as domestic wire payments. 

Also, wire transfers can be linked to wire transfer businesses, such as Western Union. Services of such companies allow people not to interact with banks directly. For more information on international wire agencies, check out this article. 

Thus, to avoid confusion, when we talk about wire transfers here, we refer specifically to payments made using the SWIFT network – as it is the most widely used transferring system.

Types of wire transfers

Domestic wire transfers – these are transfers made within one country. Usually, banks that operate within one country provide their wire transfer options to send money between bank accounts. For it, they can utilize SWIFT or domestic transferring systems. For instance, as we mentioned, the ACH payment is considered a domestic wire transfer for the US. 

International wire transfers. These transfers are made between different countries and require SWIFT to carry them out. 

How to make a wire transfer using SWIFT

It is where the difference between ACH and wire SWIFT transfers is very noticeable. Here’s the step-by-step process for the latter:

1. Log into your bank account. To make a payment, you need the following details about the beneficiary: their name, address, account number or IBAN, and a SWIFT code. The SWIFT code, also known as Bank Identifier Code (BIC), is a code that the SWIFT network assigns to every financial institution that is a part of it. The BIC contains all the main information about the said institution.
2. We advise you to check the foreign exchange rates if you are sending funds internationally.
3. Once you click the transfer button, your bank sends the payment instructions through the SWIFT network to the beneficiary’s bank (not the Clearing House, as with ACH money transfers).  If the sender’s and beneficiary’s banks don’t have any relations, an intermediary bank can be used to complete the operation. If this happens, the transfer execution time may be longer than expected.

Wire transfer vs. bank transfer – is there a difference? 

Although these two terms can be used synonymously, as you typically need banks for both, there is a difference. Bank transfers happen between banks and usually occur domestically (like ACH bank transfers), while wire transfers utilize a financial system, such as SWIFT, in addition to banks and are used internationally. 

Examples are ACH payments, Faster Payments Service (in the UK), Unified Payments Interface (in India) for bank transfers, and SWIFT, IBAN networks for wire transfers.

ACH payment vs. wire transfers: what to choose

So, which option is better for you: ACH or wire transfer? Let’s compare them. 

Points of comparison	ACH payments (in the US)	Wire transfers via SWIFT
Location	Work in the US exclusively	Cover over 200+ countries and territories
Types of transfers	Domestic	Domestic, international
Transfer process	Via the Federal Reserve Bank or the Electronic Payments Network (The Clearing House)	Via the SWIFT network
Currencies supported	US dollars	All major currencies. SWIFT Global Payments Innovation supports 150+ currencies, but each bank has its list of currencies which can be used for SWIFT payments.
How long the transfer takes	On average, 1 to 3 working days.	Time varies a lot. It can be 1 to 4 business days or longer if there are bank holidays or multiple intermediaries for international transfers. For domestic ones, the payment can arrive the same day or in 1 to 2 days. Some domestic wire transfer options can even transfer funds immediately.
Fees	Usually free, can have a flat fee	Varies a lot. Domestic transfers are cheaper ($0 to $20), while international SWIFT transfers can cost from 20$ to 65$.

As you can see, when comparing ACH payments vs. wire transfers, there are pros and cons to both. For instance, ACH bank transfers only cover the US, while wire SWIFT transfers work practically for any country and have a wider variety of currencies. At the same time, ACH money transfers are cheaper.

So if you decide which payment method you need – wire or ACH, you need to consider your and the beneficiary’s locations and costs. 

Make international transfers with Genome

Genome is an electronic money institution that provides services for clients in the EU and Europe. Although you can’t send an ACH money transfer online using our platform, we provide other options. For instance, you can send a SWIFT* transfer to the US and multiple other countries or use SEPA payments within the EU. We also offer internal transfers between the Genome users – the beneficiary will receive the funds immediately!

Here are Genome’s prices for incoming and outgoing SWIFT* transfers, the complete pricing can be found here.

*Please note that SWIFT transfers are temporarily unavailable.

Types of accounts	Incoming transfer	Outgoing transfer
Personal account (EEA residents)	10 EUR	15 EUR
Personal account (Non-EEA residents)	10 EUR	25 EUR
Low-risk business account	10 EUR	20 EUR
High-risk business account	30 EUR	30 EUR + 0.2% of the transaction amount

Start a personal or a business wallet at Genome and see for yourself! The platform provides multiple features for individuals, businesses, and merchants! 

FAQ

What is an ACH transfer?

It is a money transfer that is made with the help of an Automated Clearing House. ACH bank transfers are domestic payments that take place within one country. The most known ACH money transfers are the ones made within the US. 

What is a wire transfer?

It is an electronic payment made between banks with the help of money-transferring systems, such as SWIFT and IBAN. Wire transfers can be both domestic and international.

Are ACH and wire the same?

Not quite, as the wire transfer is a very common name for most financial operations that involve sending money. Meanwhile, ACH money transfers can only be made with the help of Automated Clearing Houses. 

What is the difference between ACH and wire?

The most notable difference we encounter when comparing ACH vs. wire transfers is how they are made, which we described in the article. Other differences are their cost and execution times. 

Is it cheaper to wire or ACH?

The ACH bank transfer is usually a cheaper option compared to wire transfers, especially when the latter are made using SWIFT. 

What are the geographical limitations of ACH & wire payments?

American ACH bank transfers can only be made within the US. With wire transfers, the situation is different. If they are made between local banks within one country, without transferring intermediaries, they are limited to said country. If wire transfers are made via SWIFT, you can potentially send them anywhere in the world. 

Is ACH or wire better for personal payments?

You can use both options for personal transfers, so it depends on the client’s location.