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ACH Transfer
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An ACH transfer is the electronic movement of money between banks through the Automated Clearing House network, one of the biggest U.S. payment systems.
The types of transfers include external funds transfers, person-to-person payments, bill payments and direct deposits from employers and government benefit programs. (Business-to-business payments are another one.) For sending money to friends and family, many transfer providers — including banks, Zelle and third-party apps like PayPal and Venmo — use the ACH network.
ACH transfers are processed in two ways, which vary in delivery speed and cost:
ACH debit transactions involve money getting “pulled” from an account. When you set up a recurring bill payment, for example, the company you’re paying can pull what it’s owed from your account each month.
ACH credit transactions let you “push” money online to accounts at different banks, either accounts you own or friends’ and family members’ accounts.
Delivery of ACH transfers can take several business days, meaning days that banks are open. Unlike the real-time processing of wire transfers, ACH transfers are processed by a network operator in batches only three times a day.
Financial institutions can choose to have ACH credits processed and delivered either within a business day or in one to two days. In contrast, ACH debit transactions must be processed by the next business day. These timelines are based on rules from the National Automated Clearing House Association, the trade group that oversees the network. Upon receiving the money, a bank or credit union might also hold these transferred funds for a period of time, so the total delivery time varies.
NACHA made a rule that ensures banks can process payments the same day they’re sent, but it’s up to each bank whether it charges you for expediting a payment.
ACH debit transfers, including payroll direct deposits and most bill payments, are typically free. If you need expedited bill payments, there can be fees.
For ACH credit transfers, banks might charge a fee of around $3 for sending money between accounts that you have at different banks, but many offer these so-called external funds transfers for free. There’s usually no fee to receive them. Person-to-person payments that you initiate through your bank or third-party apps such as PayPal can cost a small fee, depending on the platform and payment method.
Wire transfers help move money electronically from one person to another, domestically or internationally, using banks or transfer providers, such as Western Union or TransferWise. Sometimes you need to send money somewhere fast.
Wire transfers are one of the most effective and quickest ways to move money for things like closing on a home or sending funds to relatives abroad. They cost a bit more and take more effort than other methods of sending money, but you’ll have peace of mind.
Here’s what you need to know:
A wire transfer is a fast way to move money electronically from one person to another using a bank or a nonbank provider such as Western Union or TransferWise. No physical money moves between locations. The term “wire transfer” comes from an era when banks relied on telegraph wires for this type of money transfer.
A bank wire consists of instructions about who will get the money, including the bank account number and how much the recipient should get. Nonbank wire transfers might not require a bank account, depending on the service, but they will require the recipient’s name, the transfer amount and the destination. You pay the amount upfront, so the transfer is final once processed.
There are two main types of wire transfers: domestic and international. The cost and delivery time vary for each. If you’re sending money overseas through your bank, you’ll generally use a wire transfer. Banks can wire amounts in the tens of thousands of dollars and send money in a foreign currency.
Your money doesn’t go straight from one bank or provider to another. A real-time wire processing system like FedWire clears the payments, similar to the way the Automated Clearing House processes ACH transfers like direct deposits and bill payments. For domestic wire transfers, money generally gets processed the same day the wire goes out — usually within a few hours. International transfers, which involve a U.S. clearinghouse and at least one foreign country’s processing system, take several days.
A wire transfer can be one of the more expensive ways to send money, especially through banks. On average, there’s a flat fee of around $25 to wire money to another person in the U.S. and about $43 to wire abroad, based on some of the bigger U.S. financial institutions’ current pricing. Recipients might also have to pay their bank, usually around $8 to $10, to receive the money.
International wire transfers have another cost, which can be hidden. Banks both in the U.S. and abroad charge consumers higher exchange rates than what they charge other banks.
For transfers through nonbank providers, the fee can depend on the provider, amount, destination, delivery and payment options, and method of sending money, such as online or in person. Generally, you’ll get a better exchange rate than you would at a bank.
For domestic transfers that are less urgent or involve a smaller amount, ACH transfers, such as external funds transfers, are better. Deliveries can take several days, but they cost a few bucks at most.
A wire transfer is secure and can’t be canceled once it’s been sent, so make sure you know the person you’re sending money to. Scam artists might say you won a lottery or sweepstakes you never signed up for and then ask you to wire money to pay supposed fees. If you fall for a trick like this, you can’t get your money back. The one exception is if you make an international transfer and then cancel it within a half-hour, assuming the wire hasn’t been picked up or deposited yet. This is one of several federal protections you have when sending international money transfers.
A wire transfer isn’t the type of money service you’ll need often, but when speed is crucial, it can be a lifesaver.
