What's the Difference Between an ACH Transfer and a Wire?

By Nadya JosifovLast Updated Aug 17, 2020 5:52:31 PM ET
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If you want to pay a bill or send money to another person, you have several options when choosing how to move funds from one bank to another. Of course, you can write a check or give someone cash, but what if you need to move money quickly to a person or business a considerable distance away? What are your options to transfer funds without putting a check in the mail, which can take days or weeks to reach its recipient?

To move funds quickly from one bank to another, you can send money via ACH or wire transfer. These two methods of transferring money are fairly similar, especially on the surface, but they also have key differences.

How Does an ACH Transfer Work?

ACH stands for "automated clearinghouse." When you send money from your bank via ACH transfer, your bank sends your transaction along with all the other ACH transactions from the bank in a single batch at the same time. The batch of transactions goes to a clearinghouse, which sorts the individual transactions by where they’re going before bundling them and sending them to their respective destinations. The bank you’re sending funds to also receives the transactions in a batch when they’re delivered from the clearinghouse.

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Transferring funds via ACH is an effective way to automate payments. Most payroll direct deposits are ACH transfers, and paying bills via your bank website sets ACH transfers in motion, too.

How Does a Wire Transfer Work?

A wire is a more direct bank-to-bank transfer. Your bank may transfer the funds directly to the bank you’re sending money to, or a third bank may act as an intermediary between the sending bank and the receiving bank. With a wire transfer, the banks verify the identities of both the sender and the recipient and make sure there are enough funds in the sender’s account.

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You can also use a third-party wire service to process and complete your transfer. The most common wire transfer services are Western Union and MoneyGram. When you use one of these services, you usually pay for the wire in cash, and the wire transfer service handles the transaction. You can wire the money directly to your recipient’s bank account, or they can choose to pick up the cash at one of the transfer company’s locations close to them.

One primary element that distinguishes ACH and wire transfers is that you don’t have to use a bank account to initiate a wire transfer. With a wire service like that at Western Union, during an in-person transaction you can pay in cash. If you don’t have a bank account, this can be an attractive option, although it does have a few disadvantages.