While ACHs and Domestic Wires are both domestic payments, there are a few differences between these types of payments.
THEY RUN ON DIFFERENT NETWORKS
An ACH transfer (a.k.a. direct deposit) is a method of sending funds from one bank to another using the Automated Clearing House (ACH) network. To process an ACH transfer, a request is made from the payor’s bank account. Then, funds are sent via the ACH network to a recipient’s bank. The Automated Clearing House network is a network of financial institutions, including banks and credit unions, that are batching transactions between them, guided by the rule-making organization, Nacha. ACH is a US-only network, thus not available for payees outside the United States.
Wire transfers are electronic interbank payments used to transfer funds directly from one entity’s bank account to another’s. Wire instructions include the bank account number and ABA bank routing number for the payee receiving the money.
Wire transfers are individual requests, while ACH transfers are handled in batches. For example, employee payroll checks are often directly deposited using ACH transfers.
BANKS MAY HAVE DIFFERENT ROUTINGS NUMBERS TO ACCEPT ACHS OR WIRES
As these are two different types of payments, many banks have different routing numbers reserved for receiving ACHs, separate from the routing number they use to receive wires. Before sending a payment, be sure to check that the routing number you have for the recipient bank accepts ACHs, wires, or both.
FEES FOR WIRES VS ACHS
While Rho does not charge for sending and receiving ACHs or wire, other banks may have sending/receiving fees for these transfers. In general at other banks, ACH transactions are lower cost than wire transfers.
Each financial institution sets its cutoff time policy for sending same business day bank wires. With wire payments, funds are immediately available within 24 hours upon arriving in the payee’s bank account. At Rho wires sent prior to 3pm EST will arrive same-day. Wires sent after 3pm EST will land the next business day.
ACHs sent prior to 2pm EST will land same-day. ACHs sent after 2pm EST will land within 1-3 business days.
ABILITY TO RECALL OR DISPUTE A PAYMENT
ACHs are much easier to recall or dispute.
Once funds have been wired, because of the immediacy, recalling erroneous transactions is much more difficult.
THE BOTTOM LINE
Wire transfers and ACH transfers serve different needs.Wire transfers are best when speed and certainty are critical. ACH payments are good for small, frequent payments. As long as everybody involved trusts each other, it’s cost-effective to use this automated system. Common examples of ACH payments include:
Direct deposit of employee pay or benefits from Social Security
Automatic monthly bill payments to utilities, lenders, and other service providers
Moving money between your accounts at different banks
Automatic contributions to retirement accounts or education savings accounts
Some merchants and organizations also like ACH transfers for one-off payments to avoid their bank's recipient wire fees.