You’ve probably heard of an ACH wire transfer in the context of getting your paycheck. ACH wire transfers are one of the most popular ways that employers send payments to their employees.
But what all is there to know about an ACH wire transfer? Are there differences between ACH and a regular wire transfer?
This guide will help you understand ACH and the pros and cons of this payment option.
First, let’s understand how ACH differs from other wire transfers.
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Why ACH is Different
What are the unique differences between ACH vs wire transfer? Regular wire transfers often take longer and require expensive fees that your bank charges. Wire transfers have long been the usual method for sending money electronically.
ACH offers far more convenience than regular wire transfers. While they are also a form of digital payment, they are usually processed at a faster rate. They often don’t require any fees and can be made entirely online, without needing the help of a bank teller.
ACH also helps you make regular payments. For example, if you wish to pay your credit card bill online you do so with an ACH wire transfer. This is much easier than having to send a wire transfer each month to the credit card company!
ACH has the reputation of being one of the most secure forms of payment. Online payments are always concerning for both the sender and the recipient. ACH has proven to be reliable and able to withstand potential security threats.
How Long It Takes
While ACH gets processed much faster, it doesn’t always mean that a payment gets paid at a faster rate. Some ACH payments happen within a few seconds. Others can take a few days to finalize.
Traditional wire transfers get sent as the sender requests them. ACH payments are sent in a batch process. These batch processes happen at least once a day. Some financial institutions are more efficient and send up to 3 batches per day.
Some financial institutions might wait 1 or 2 business days to batch the ACH payment. For example, if you make a payment for an online bill you might get told that there’s a cutoff time. If you make the payment after the cutoff time, the ACH payment will process on the next business day.
ACH credit payments can take up to 3 business days. ACH debit payments are required to get processed within the next business day. These are preset rules determined by the National Automated Clearing House Association. As a general rule, ACH payments always follow these guidelines and it’s rare for them to take longer.
Some banks might charge a fee if you wish to expedite a credit or debit payment through ACH.
What an ACH Wire Transfer Costs
Fees vary depending on the financial institutions that you use. Most financial institutions will not charge you for bill payments or for payroll services.
For credit transfers, some banks might charge a low fee. These likely won’t exceed $3. These are far lower than wire transfers that can cost high fees. Traditional wire transfers might cost more depending on the amount sent. Traditional wire transfers often charge higher fees for international payments.
It’s also rare to have to pay a fee to receive an ACH payment. Most banks, whether small or large, will forgo any fee to receive an ACH payment no matter how large the amount is.
You might have to pay a fee if you make a payment or receive a payment through a third-party payment service. If you choose an electronic payment service you want to pay attention to whatever fees they charge. It’s rare to find payment solutions that don’t charge any fees, though there are some. You want to make sure that the costs are as low as possible.
ACH For Smaller Payments
If you need to send or receive smaller payment amounts, a third-party service is usually the best way. These services are often faster and easier to rely on than your bank.
For example, Zelle allows you to connect your debit card to the app. You can use Zelle to send an instant payment to another user. If you receive a payment it’s often posted to your bank account immediately. At most, it takes 1 business day to post to your account.
Venmo is another app that works for sending or receiving regular smaller payments. Venmo holds your money in your account and only transfers to your bank after you make a request. With Venmo, it takes 1-3 business days to receive your money to your bank account. Venmo charges a fee for an instant transfer.
For selling goods and services online, merchants often depend on online escrow services. These make sure that payments are held and not sent until goods/services get delivered.
For example, if you send a payment to purchase a domain name the escrow will hold your payment until you receive the domain name. If you never do, your money is returned to you. Escrow services use ACH to send payments and they do charge a fee based on the amount of money in a transaction.
If you work with amounts no more than $2,000 you want to look into these third-party apps and services. These are the most convenient ways to send and receive ACH payments. These have minimal fees or none at all and have proven to be reliable.
ACH Restrictions
There are some restrictions or hurdles you’ll face with ACH payments. Most banks cannot send ACH payments to non-US banks. The workaround for this is to use a third-party service.
Your bank can prevent a transfer if you have insufficient funds and might charge a penalty fee. You want to be cautious of this if you depend on ACH to pay employees.
Banks and third-party services that allow ACH transfers often have set limits on how much can get sent each week. With savings accounts, there are also limits on how many ACH payments can get made each month.
Start With ACH Payments
Now that you know the pros and cons of an ACH wire transfer option, we encourage you to look into it for sending and receiving payments. This convenient service has helped countless individuals and businesses to spend and earn without any hassles!
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