Many of us may wonder about the difference between ACH direct deposit and a wire transfer payment. From the outside looking in, they look very similar—both ACH and wire payments are fully electronic methods for transferring funds between banks or individuals, such as online check writing services. However, there are still key differences between these payment methods, say smartpayables.com.
Depending on the purpose of your payment, person or institution you’re working with, and the need for expediency, one type of payment may be more beneficial than the other. Here, we look into the differences between ACH and wire payments to help you make a more informed decision. We also look at a few common wire transfer scams to help keep you and your money safe.
What are ACH Payments?
Automated Clearing House, or ACH, is a common and widespread method for transferring funds electronically. An ACH payment is also referred to as direct deposit and is used in multiple instances by businesses, the government, and individuals. This payment type runs through the Automated Clearing House network and is a safe and secure method for transferring funds.
Without realizing it, most of us use ACH payments all the time. Most of our daily electronic transfers are ACH payments. If you’re transferring funds between accounts electronically, receive a direct deposit payment, pay your bills online, or receive a tax refund, these are all types of ACH payments.
What are Wire Payments?
Wire payments are another method for the electronic transfer of funds. With a wire payment, no physical cash is ever exchanged. Instead, a wire payment transfers information between banks or transfer agencies that then redistributes the funds. Typically, the information being exchanged includes account numbers and the amount of funds being transferred. Additional information can be required for international wire transfers.
Wire transfers are commonly used for large purchases. Compared to a printed check, a wire transfer guarantees that the promised funds are available—essentially, a wire payment can’t “bounce” like a check. This is why wire payments are preferred for large purchases, such as a down payment on a house, to ensure the money is received.
Wire transfers are quick and secure. Some wire payments can be processed within a matter of minutes and the funds are immediately available. However, in some cases, wire transfers can take up to two days to be completed. International transfers, on average, take longer to complete than domestic ones. However, if you need to move money fast, a wire transfer is still your best option.
Benefits of ACH Payments
One of the primary benefits of using ACH payments is the cost. Most ACH payments are entirely free, which is, in part, why they’re so common. Compared to wire transfers, paper checks, or debit or credit cards, ACH has a much lower processing fee. If you run a business and have to make a lot of transactions (including payments, salaries, etc.), you could save a lot of money, in the long run, using ACH payments.
ACH payments are also secure. According to a 2016 report, paper checks are the most susceptible to fraud as they can be easily forged and duplicated. ACH payments, being entirely digital, are much more secure.
Benefits of Wire Payments
Wire payments, like ACH payments, are, overall, a very secure and reliable method for transferring funds. The primary advantage for using wire payments is the speed of the transaction. For domestic wire transfers, the money can be made available within a matter of minutes and a matter of just a few days for international transactions.
This last bit is important, too. Wire transfers allow you to send or receive money throughout the world, while ACH payments are limited to domestic transactions. Therefore, if you’re looking to transfer funds with a person or organization outside of the United States, then you’ll need to use a wire payment.
Safety of ACH and Wire Payments
For the most part, both of these electronic payment methods are safe and secure. Since cash or a check is never sent through the mail or exchanged, your funds can never get lost or misplaced. Electronic transfers ensure this level of security. However, whenever money changes hands, there’s always the potential for some type of fraudulent activity. With wire payments, once the wire is processed, those funds cannot be recovered. With ACH payments, on the other hand, a fraudulent transaction can, at times, be reversed, making this type of payment even more secure.
Common Wire Transfer Scams
While both ACH and wire transfer payments are mostly secure, there is always the potential for fraud with any form of financial transaction. A good rule of thumb is to never send money (or even accept it) if you can’t verify the other’s person’s identity. However, scammers are consistently looking for new ways to cheat people out of their money. Below are a few common wire transfer scams:
1. Overpaying
One of the most common methods of wire transfer fraud is done by overpaying. If you sell something online, a scammer might send you a check worth more than the agreed-upon amount. Then, they’ll ask you to send them a check or transfer for the difference. All this can happen before you realize the initial payment was fraudulent.
2. Online Relationships
Many online relationships may not be what they appear. Some scammers will target people through dating apps and websites and, after trust is developed, ask for money for some type of emergency.
3. Lottery or Prizes
Good news: you’ve just won the lottery or a major cash prize. The bad news? It could be fake. Many scammers send out fake lottery or prize winnings with a request that a small payment is needed to cover taxes or process the payment.
4. Selling Products Online
If you sell anything online, you should be cautious of wire transfer scams and fraudulent checks. In these scenarios, scammers will offer to purchase a product from you and pay for it with a fraudulent check or wire transfer, hoping that you’ll ship out the product before realizing the payment is fake.
Conclusion – Difference Between ACH and Wire Payments
Transferring funds electronically is advantageous over traditional methods, such as sending checks or cash in the mail- check out this online check printing company. With electronic transfers, you can be sure your money will be sent or received safely and securely. However, there is always the potential for fraud, so be sure you know who you’re sending or receiving money from—especially if it’s an online transaction.
ACH payments and wire payments are reliable methods for transferring funds in our digital, electronic world. If you’re still not sure which payment method to use for your personal or professional needs, consider reaching out to your financial institution for more information.