ACH vs. wire transfers: What’s the difference and how do they work?

Summary: 

• ACH and wire transfers are different methods for moving money electronically. They each have their own advantages and use cases. 

• ACH transfers are a cost-effective solution for sending money within the United States, while wire transfers offer a faster but more expensive option.

• ACH transfers are ideal for recurring transactions such as payroll and vendor payments, while wire transfers are best for urgent or large payments that need to clear quickly.

When making transfers, choosing the right transfer method can impact your business’s cost and efficiency. In fact, ACH transfers often cost businesses significantly less than wire transfers, sometimes just a fraction of the price.

Understanding the differences between these two transfer methods can help you cut unnecessary costs, ensure payments arrive on time, and minimize disruptions to your business operations.

In this ACH vs. wire transfers guide, we’ll break down the differences between the two transfer methods, explain how each works, when to use them, and which one makes the most financial sense for your business.

What’s an ACH transfer?

An ACH transfer is a US-based electronic bank transaction that moves money between accounts using the Automated Clearing House (ACH) network. Businesses often rely on ACH transfers for payroll, vendor payments, and recurring bills because they're significantly cheaper than wire transfers.

While wire transfers are faster, ACH transfers are ideal for making cost-effective, non-urgent domestic payments because they’re affordable and give you the option to schedule, making it easier to manage recurring payments.

Although the ACH network primarily facilitates domestic US transfers, you can now access International ACH Transactions (IATs) to send payments from a US-based account to foreign ones and vice versa. These transactions often provide a lower-cost alternative to international wire transfers.

How ACH transfers work  

ACH payments electronically transfer funds between two accounts.

The ACH transfer process begins with the sender or receiver initiating an ACH transfer through online banking, a mobile app, or a direct request to a financial institution. The sender provides the necessary information, such as the recipient’s bank account number and routing number, along with the transfer amount.

The ACH network, operated by the National Automated Clearing House Association, processes the transaction. The sender’s bank sends the transaction details to the ACH network, which then routes the information to the receiver’s bank.

The receiver’s bank credits the recipient's account with the funds, which are typically available within 1–3 business days. Both parties then receive transfer confirmation via bank statements or online portals. Fees will also vary, but you can expect to pay around $0.40 per ACH transaction.  Other fees may include processing, debit, and credit fees.

Examples of ACH transfers and their costs 

ACH transfers can also help automate recurring expenses, such as software subscriptions, payroll, or vendor payments, allowing you to schedule them in advance and in batches. These transactions can also help you avoid some of the costly fees associated with other transfer methods.

What’s a wire transfer?

A wire transfer is an electronic payment method that moves money between bank accounts, both domestically and internationally. These transfers are ideal for sending large sums of money quickly and securely.

You typically use a wire transfer to handle cross-border payments with suppliers, vendors, or partners, where speed, security, and reliability are essential. While ACH transfers are cost-effective, you may prefer wire transfers for transactions that require immediate attention.

However, domestic and international wire transfers can be quite expensive, as both the sending and receiving banks may charge fees. Also, keep in mind that it’s difficult to reverse these once they’re complete – even if there’s an error.

How wire transfers work  

Wire transfers use a network of banks and financial institutions to move money from one account to another.

The process begins when you, the sender, provide your bank with the recipient’s details, including their name, account number, and bank information. For international transfers, you’ll also need a SWIFT or IBAN code.

You’ll pay the transfer fee, which can vary depending on the bank and type of transfer. Your bank will then verify your identity and authorise the transaction.

Once approved, your bank will securely transmit the payment instructions to the recipient’s bank through a secure network (like SWIFT for international transfers), sometimes using intermediary banks for routing. Finally, the recipient’s bank processes the payment and deposits the funds into the designated account, completing the transfer.

A domestic wire transfer can take just a few hours to complete, while international wire transfers can take 1–5 business days, depending on where you’re sending money. Their usage facilitates cross-border transactions, making it easy for you to do business globally.

For domestic wire transfers, you can expect to pay up to $35. International wire transfers can cost as much as $50. You can also expect to pay for foreign exchange fees or currency conversion fees.

Examples of wire transfers and their ongoing costs

Businesses often use wire transfers to make fast and secure payments, especially when making transactions across borders. For example, if you're paying international contractors or suppliers, wire transfers can be a reliable way to ensure funds arrive without delays.

However, you’ll need to account for foreign exchange rates and processing fees. To save money on wire transfers without sacrificing efficiency, you can opt for a business bank account that offers transparent pricing and competitive FX rates.

How to overcome payment challenges 

Managing payments is a routine part of running a business, and choosing the proper transfer method for each payment can help you stay on top of transaction costs and unpredictable processing times, keeping your operations running smoothly.

But a transfer method is just one piece of the puzzle. Managing multiple currencies, keeping track of payments, and having a real-time view of your cash position are all essential parts of running a global business.

Here are some proactive steps you can take to simplify payments, reduce costs, and improve efficiency:

Open local currency accounts so you can utilise domestic and local transfers

Opening local currency accounts allows businesses to tap into domestic transfer networks, such as ACH in the US, rather than relying solely on costly international wire transfers. This can significantly reduce conversion fees, speed up transaction times, and eliminate unnecessary foreign exchange markups.

With local payment networks (or domestic rails), your business can complete cross-border payments more efficiently and affordably. It’s a smart way to make international transfers more predictable. 

Use a provider that can access the Interbank rate to reduce your costs

Choosing a provider that offers access to the interbank exchange rate – the rate banks use to trade currencies rather than the marked-up rates provided by traditional banks – can significantly cut down FX costs. This ensures your business isn’t overpaying on conversions, helping you maintain healthy margins.

Centralized financial management

Managing your finances across multiple tools and platforms, currencies, and bank accounts can result in fragmented financial operations, leading to bottlenecks, inconsistent data, and reconciliation errors. By using a single tool for your financial management, you can see all your inflows and outflows from a single place of truth.

The smarter way to send and receive payments

While ACH transfers offer a cost-effective solution for recurring payments, wire transfers provide speed for urgent or large international transactions. Knowing the differences between these transfer methods and having the flexibility to decide between them can help you expertly navigate delays and high fees that disrupt operations. 

With Airwallex, you can make payouts in over 150 countries and regions, as well as 60+ currencies, to move money faster and at lower costs. With an Airwallex Business Account, you can open local currency accounts with local banking details. This lets you receive, hold, and send foreign currencies via local payment rails even if you aren’t physically present in those markets.

Unlike traditional payment solutions that involve costly transaction fees and foreign exchange (FX) fees, Airwallex gives you the flexibility to choose from a wide range of local and global transfer options, ensuring you get the fastest and most cost-effective solution.

But beyond just payments, Airwallex is a complete financial solution. From built-in Spend Management and payment acceptance, our platform simplifies financial management by having everything you need in one place.

ACH and wire transfers frequently asked questions 

Is wiring the same as ACH?

No, wire transfers and Automated Clearing House (ACH) transfers are both types of electronic fund transfers (EFTs), but they work differently. Wire transfers are quicker and commonly used for urgent or high-value payments, though they have higher fees. ACH transfers, are slower but more cost-effective.

Which is better, ACH or wire transfer?

ACH transfers are better for routine, cost-effective payments like payroll and vendor invoices, while wire transfers are ideal for urgent, high-value transactions. Wire transfers are faster but more expensive, whereas ACH is slower but more affordable.

Is ACH a routing number or wire?

ACH transfers and wire transfers both use routing numbers, but they rely on different processing networks. ACH routing numbers facilitate batch-processed electronic transfers, while wire routing numbers support real-time, bank-to-bank transactions.