ACH payments vs. wire transfers: Everything small business owners should know

By Haley Davidson

Founder & Content Strategist, Gaia Content

Small business owners typically send and receive various payment methods. But with so many payment options available, it’s hard to know which one to use—and when to use it.

In reality, you’ll probably use different forms of payment for various reasons. ACH payments and wire transfers are two payment methods you’ll likely encounter. Both offer convenient ways to transfer funds. 🔁

But when it comes to ACH payments vs. wire transfers, there are some key differences to keep in mind.

🔑 Key Takeaways:

  • Automated Clearing House (ACH) transfers and wire transfers are both used for electronic fund transfers and electronic bill payments.

  • ACH payments are usually cheaper to process than wire transfers.

  • Wire transfers may process faster than ACH transfers.

  • ACH payments go through a third-party system before they’re processed.

  • You can send wire transfers directly from one bank account to another.

ACH Payment

Wire Transfer

Processing speed 👟

Typically, it takes 1-3 business days.

Same-day ACH is available but may cost more.

Domestic transfers are typically completed within 24 hours.

International transfers may take 2-5 business days (depending on how much money you transfer).

Transaction costs 💰

Free or low-cost, prices vary by financial institution

With Relay business owners can send next-day ACH payments for $0

More expensive than ACH, with fees ranging from $5 to $50+

With Relay, business owners can send domestic wires for $5

Security and fraud 🔐

ACH payments go through a clearinghouse network, making them less prone to fraud and scams

Wire transfers are more susceptible to fraud. Wire transfers are a common target for scammers. 

Transfer limits 💵

ACH transfer limits may vary by financial institution but are typically lower than wire transfer limits

Wire transfers typically have higher transfer limits

Domestic and international payments 🌏

ACH payments are commonly used for domestic transfers, but not all financial institutions offer international ACH payments. 

Wire transfers are commonly used for domestic and international payments. 

In this article:

What is an ACH payment?

A financial institution, like a bank 🏦 or credit union, can electronically transfer funds to another financial institution through the automated clearing house network. ACH payments are sometimes called direct deposits, direct debits, or bank transfers.

You’re probably already using ACH payments regularly. That’s because many people use ACH transfers to enable auto-pay services. Platforms like PayPal and Venmo also use the ACH network to transfer funds between individuals and businesses. 🙌

How does an ACH transfer work?

Before we dive into how ACH payments work, you’ll need to know some basic terms:

  • Originator: The party that initiates ACH payment instructions.

  • ODFI: The originating financial institution (ODFI) sends ACH payment information to an ACH operator.

  • ACH operator: The clearing facility that receives payment entries from the ODFI and sends those entries to the correct RDFI. ➡️

  • RDFI: The receiving financial institution gets the payment information from the ACH operator and deposits or withdraws funds from the corresponding account holder.

  • NACHA: the National Automated Clearing House Association) is an independent organization responsible for supervising the ACH network and ensuring its integrity. 🔐

Also, keep in mind there are two types of ACH transfers: ACH debits and ACH credits: 

  • ACH debits: A type of ACH transfer. When the receiving party requests funds be pulled from the paying party’s account. Simply put, ACH debits are initiated by the party who needs to be paid.

  • ACH credits: A type of ACH transfer. ACH credits are initiated by the party that needs to pay. The paying party requests to move the funds from their account to the recipient’s account.

All ACH transfers (both ACH debits and ACH credits) are sent through the ACH network. This network can move ACH payments efficiently and securely from one financial institution to another. 

ACH transfers are processed in batches, meaning the clearing house processes multiple transactions at one time. The network processes ACH batches at different time intervals throughout the day. If you send a batch after the last interval, you’ll have to wait until the next business day to process the payments. ⏰

How small business owners use ACH transfers

Small business owners often use ACH payments for recurring payments. For example, ACH payments—like ACH payroll payments—are often used for employee direct deposits. Some businesses also use ACH transfers to send money to vendors or collect money from clients. 💲

Enabling auto-pay is a great way to leverage ACH transfers. Auto-pay can help you stay on top of your bills and avoid late fees. You might want to automate your small business’s utility, rent, and subscription payments.

What is a wire transfer?

A wire transfer is another type of electronic fund transfer. Wire transfers move funds from an account at one financial institution to an account at another financial institution. Unlike ACH payments, wire transfers don’t go through a third-party payment network. These transfers are moved directly from one bank or credit union to another. 🔁

Unlike ACH payments, which are processed in batches, wire transfers are sent individually. Since wire transfers are sent directly to the financial institution, they’re typically used to issue fast payments. 👟 You can use wire transfers to transfer large sums of money, too. 💰

How do wire transfers work?

Wire transfers let you directly transfer money from one financial institution to another. If both financial institutions are located within the United States 🇺🇸, it’s called a domestic wire transfer. If one of the financial institutions lies outside of the U.S., it’s called an international wire transfer. 🌏

The party sending the wire transfer pays the amount of the transfer upfront. This transaction typically occurs at the sending party’s bank or credit union. Before you can send a wire transfer to someone, you must provide:

  • The recipient’s name

  • The recipient’s address

  • The name and address of the recipient’s financial institution

  • The recipient’s bank account number

  • The routing number of the recipient’s financial institution

  • The reason for the wire transfer

Once the sender submits this information and makes the payment, the sender’s financial institution initiates the wire transfer. The sender’s financial institution will then send a message to the recipient’s financial institution with details about the wire transfer. 

These messages are sent through secure networks, like Fedwire (operated by the Federal Reserve) and SWIFT (a network used for international wire transfers).

Once the receiving bank 🏦 gets the wire transfer message, it transfers funds from its reserves into the recipient’s bank account. The two financial institutions settle up wire transfers after the electronic fund transfers (EFTs) are completed.

How small business owners use wire transfers

Wire transfers provide small businesses with an efficient way to transfer large sums of money. Let’s say you’re running low on inventory during the busy holiday season. If you need to expedite an order from an overseas vendor, a wire transfer can help. Wire transfers are also used for large one-time purchases like real estate. 🏫

ACH payment vs. wire transfers: Understanding the key differences

ACH payments and wire transfers are two ways to transfer money. But there are some key differences between these two forms of electronic fund transfers (EFTs):

Processing speed 👟

ACH payments are processed through an automated clearing house before they’re delivered to the recipient’s bank account. On the other hand, wire transfers are sent directly from one financial institution to another.

That said, ACH payments typically take one to three days to process. Some financial institutions offer same-day ACH payments, but this service may cost more.

Wire transfers are typically faster than ACH payments since wire transfers are usually completed within a day. Keep in mind that international wire transfers may take a few days to process.

Payment processing speed may vary by financial institution, too. For example, sending an ACH payment through Relay (that’s us!) typically only takes 1-2 business days to complete. 🙌 With Relay Pro, you can also send same-day ACH payments for free. 

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Domestic wire transfers are typically processed within one business day, while international wire transfers may take between 5 and 7 business days to process. 

Transaction costs 💲

Processing fees may vary by the type of transfer and the financial institution. However, ACH transfers are typically considered more cost-effective than wire transfers.

With Relay, you can send and receive next-day ACH payments totally free. Relay Pro customers can send same-day ACH payments for free, too. 🥳

Wire transfer prices can vary significantly from one financial institution to the next. International wires may cost more than domestic transfers. That said, wire transfers typically range anywhere from $15 to $75. Some banking platforms charge much less, though— for example, Relay only charges $5 for domestic wire transfers.  

Security and fraud 🔐

Since you send ACH payments through an automated clearing house 🏠, they’re considered a relatively safe way to transfer funds. Wire transfers are a great way to send direct payments quickly, but they are more susceptible to fraud and scammers. 👎

In the event of scams or payment errors, someone can reverse ACH payments. But you can’t reverse wire transfers. Once a wire transfer is processed, the funds are considered the recipient’s property. That said, refunds typically aren’t possible for fraudulent wire transfers. 

Transfer limits 📈

ACH transactions and wire transfers are subject to transfer limits. However, the exact limit may vary by transaction type and financial institution 🏦.

Before you start a money transfer, confirm how to send a payment—and the payment method’s transfer limits—with your financial institution. ✅

Domestic and international transfers

ACH transactions are commonly used for domestic payment. 🇺🇸 Some financial institutions allow international ACH transfers as a form of remittance transfer.

You can use wire transfers for both domestic and international payments. 🌏 When sending an international wire transfer, your financial institution may ask you to provide additional details, like a SWIFT code. 

Send and receive fast, affordable payments with Relay

When it comes to sending and receiving ACH payments and wire transfers, your banking platform matters. Online banking platforms, like Relay, offer some advantages over traditional banks. 🙌

Relay is an online banking platform offering cost-effective transfer services for small business owners. Take Relay’s competitive rates, for example. Some financial institutions charge for each ACH transfer. But Relay customers can send and receive next-day ACH payments for free! 🥳

Relay also offers competitive wire transfer fees. While most financial institutions charge $25+ for wire transfers, Relay only charges $5 per transfer. Plus, with Relay Pro for $30 per month, you can send wire transfers and same-day ACH payments for $0.

Whether you need to send business-to-business ACH payments or wire transfers, Relay offers the payment solutions you need. Send and receive money on your terms with Relay’s convenient digital features. 

Ready to make the switch to Relay? Sign up completely online here. 

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