Do you need to send or receive money? In most cases, an electronic transfer is an excellent, hassle-free option. Unlike mail, you can ensure that nothing gets lost in the process. The fund transfer will also be done safely, with bank keeping transaction records that make it easier to track everything.
There are several different ways to move money electronically. However, two of the most popular choices are ACH transfers and wire transfers. Both of these methods are great ways to move money from one bank to the other. Your business might need to use wither on to pay someone you owe money or to pay a supplier. You might have vendors paying you for goods or services through one of these two methods. That’s why, in most cases, you’ll be torn between ACH and wire transfers.
While both ACH transfer and wire transfer are great electronic payment options, both have certain advantages over the other. They both offer unique features when it comes to the payment process, cost of the transaction, speed of payment, the security behind the payment transaction, and how the business can best use them. For you to know which payment option is best for your business, here’s what you need to know about the differences between ACH transfers and wire transfers.
What is an ACH Transfer?
An Automated Clearing House Transfer, more commonly known for its abbreviation “ACH,” is the manner of moving funds from one bank account to another. This type of transfer goes from the originating bank to a central clearing house called known as an Automated Clearing House network. Managed by the National Automated Clearing House Association, the ACH network approves the transaction. The money is then transferred to the receiving bank for posting to an account. In addition, ACH payments also require additional information depending on the bank.
What is a Wire Transfer?
Similar to ACH, wire transfers also move funds from one bank to another. However, it doesn’t involve using a clearinghouse. Instead, other banks act as intermediaries to the entire money transfer process.
The Difference Between ACH Vs. Wire Transfer
Apart from who acts as the intermediary, there are many distinct differences between ACH transfers and wire transfers. We’ve listed some of the significant ones below so that you’ll get a full grasp at just how different these two payment methods are. Consider the information below and get to know more about ACH payments and wire transfers.
Payment Processing Terms
- ACH Transfer. An ACH transfer usually takes two to three days to complete the electronic money transfer process. The reason why it takes this long is that banks and clearing houses process these transfers in batches. They wait until enough transactions are received before they review them. However, ACH payments involve working towards making funds available quickly – even on the same day. Some payments are already eligible for same-day action. So if you’re business doesn’t require immediate money transfer, you can choose the ACH electronic transfer funds system.
- Wire Transfer. For wire transfer, it usually takes a day or even less. There are times when the money is already available for use on the same day the wire transfer is made. The quick availability of funds is one of the major perks of a wire transfer.
Cost of Payment for ACH Transfer vs Wire Transfers
- ACH Transfer. An ACH transfer is typically free, at least for the recipient. On the other end, payers are usually charged less than a dollar for any transaction they make, perhaps even nothing at all. So if you’re the receiving end of a transaction and you’re not on a rush with getting paid, you can choose ACH payments so that you won’t have to pay for the transfer.
- Wire Transfer. For wire transfers, both the sender and receiver are usually charged with a fee. It’s quite common for financial institutions to charge between $10 to $35 to wire transfer money. In addition to the sender fee, some financial institutions – particularly the small ones – charge another small fee to the receiver of the money.
Comparison of Security Features
When it comes to money transfer via electronic channels, security is usually a major concern. For either ACH or wire transfers, you will need to provide specific information such as names, bank account numbers, and routing numbers. This information can be used to steal money from your account. That’s why you should make sure that you trust the recipient before you provide this crucial information. This is the case for both an ACH network and a wire transfer.
- ACH Transfer. ACH payments can be reversible. This feature is particularly useful, especially when someone at your business has made an error. It’s also useful in cases of fraud. However, if you’re the recipient of the funds, reversing may leave you without the cash you may have through you had coming into your account.
- Wire Transfer. Sending money via wire transfer is a lot riskier than receiving money from the same method. Once initiated, wire transfers usually can’t be changed. That means your money may not be recouped since the receiving bank makes money available immediately to the recipient. So trust play an important factor when it comes to wire transfers. However, receiving money via wire transfer is practically risk-free since money is being made available for you to draw down and use quickly.
Processing ACH Transfers and Wire Transfers
Both ACH payments and wire transfers can be processed online. However, it will largely depend on your bank. It’s important to note that some institutions require additional steps for wire transfers – especially when sending out large amounts of funds. Your bank might require you to verify wire transfer instructions through your phone. In addition, you might even have to use electronic or paper forms to complete your request. In this case, you might want to use ACH, but it will still depend on what’s best for your business.
- ACH Transfer. To send ACH payments, you usually use either an online or physical form from the organization that you’re paying or the service you’re using. Most consumers are unable to create ACH payments to third parties from personal bank accounts. However, businesses have several options available. When using peer-to-peer services, you might just need to provide the recipient’s mobile phone number or email address, and the recipient provides their bank account information separately.
- Wire Transfer. To send a wire transfer, you’ll need to provide information about your account and the account you want to send funds to. The required information will include bank names, account numbers, ABA routing numbers, and the complete names of each account owner.
Common Uses of ACH vs Wire Transfers
Due to the differences mentioned above, ACH transfers and wire transfers serve different needs and purposes.
ACH Transfer. An ACH Payment is suitable for small, frequent payments. As long as everyone involved trusts each other, it’s a cost-effective way to transfer funds or get paid. In most cases, you won’t have to pay anything to use this automated payment system. Common examples of ACH payments include the following:
- Direct deposit of employee pay or benefits from Social Security.
- Automatic monthly bill payments to utilities, lenders, and other related service providers.
- Moving funds between your accounts at different banks.
- Automatic contributions to retirement accounts or education savings accounts.
Some organizations and merchants also like ACH transfers for its one-off payments. For instance, you might have the option to pay via e-check. By doing so, you are authorizing the organization to deduct funds from your bank account, and it minimizes processing fees (payments tend to be costlier when you pay using a credit card).
Wire Transfers. Wire transfers are best during times when speed and certainty are most critical. Otherwise, there isn’t any reason for you to pay the fee and take any unnecessary steps to complete a wire payment. Take a down payment for a home purchase as an example. The seller won’t release the title unless they’re confident that you can pay. For that manner, guaranteed checks and wire transfers are useful.
Which Payment Option ReliaBills Accept?
ReliaBills accepts ACH transfer payments. That means if you think that an ACH payment transfer makes sense for your business, then you can guarantee that ReliaBills also accepts that type of payment. No matter what your needs are, ReliaBills will always make sure that you get paid on time, no matter the circumstances!
Recurring Payments Using ACH
Recurring billing is the method of automating your payment processing. A user will authorize payment to be made from a credit card or bank account on a regular billing cycle. In most cases, the billing cycle tends to be scheduled on a set date every month. This method can be beneficial for both the merchant receiving the funds and the customer being billed.
ReliaBills users benefit from setting up recurring payments since they’re less likely to miss out on the present and future payments. In addition, human error in payment authorization will reduce drastically when you automate the process using ReliaBills as your online invoicing and recurring payment solution. Recurring billing also offers a more sustainable source of payment, which is always essential for any growing business.
Perks of Using Recurring Billing
Payment churn is often a common problem with recurring billing. Fortunately, ACH transfer offers a much lower payment churn since it’s linked to a bank account. Recurring billing software like ReliaBills provides re-attempts of failed payment, which means your customers will still have an option to change credit cards or payment options to fix the payment error.
Another potential benefit of ACH integration when using recurring billing is a drastic improvement in user experience. For example, Reliabills and its ACH recurring billing solution allow you to customize and personalize the payment experience. Some users don’t feel comfortable entering their credit card information to make payments on your merchant website.
Now, they can log into their bank account to authorize payment. Our recurring software places your customers in a safe and secure payment gateway while saving customer information for present and future reference. Reliabills supports instant bank verification while also saving your customer’s payment information. That way, you can give them peace of mind knowing that their billing details are held and stored in a safe and secure customer portal.
Is Recurring Billing Ideal for ACH and Wire Transfer?
Whether your business offers ACH or wire transfer, you can benefit from incorporating a recurring billing process into your payment strategy. It’s a convenient way to bill your customers every billing cycle for the same amount. Your customers will receive electronic notification (via email) every month, triggering an automatic payment via your preferred payment option (credit card, ACH, or wire).
With ReliaBills and its convenient recurring invoicing system, you can enjoy the following benefits:
Consistent and Reliable Cash Flow
Getting paid is the ultimate goal of any business. That’s why you need to ensure that the cash flows to ensure that your business stays afloat. Like clockwork, recurring billing is consistent throughout the entire process. It guarantees to get you paid to calculate your income for a particular timeframe will be simple and easy. You can then use this information to predict future growth and potential earnings.
Decreases the Instance of Delayed or Non-payment
The decrease in potential late or missed payments benefits both the merchant and customer. Recurring billing saves time and money from having to track down customers that commit late payments. At the same time, it also reminds you to send out your invoice every month, enabling you to focus more on tasks that will help grow or improve your business. Your customers will enjoy the benefit of no longer remembering due payment dates or the expensive late fees due to late payment.
Improved Customer Retention
Convenience is the key to retaining as many customers as you can. With ReliaBills and its recurring billing system, you won’t have to experience any awkward conversations with your customers about late payments. This perk can go a long way in building and cultivating customer relationships.
Save Time and Money
Manual invoicing and payment processing requires a lot of manpower to execute properly. Not only is it costly, but it can also take a lot of time to execute properly. By automating your payment processing through a recurring billing software like ReliaBills, you’re potentially cutting down both time and expenses for your invoicing to be consistent. With recurring billing, everything is now automated. That means you will also save these precious resources and allocate them to other parts of your business that need improvement.
We hope that you learned a lot about the ACH and wire payment options. So what will it be? Do you choose ACH, or is your business more suitable for wire payments? You can always come back to this article if you feel lost again and use it as a reference to help you with your decision.