When it comes to sending and receiving funds electronically, you’ve probably heard of an ACH (Automated Clearing House) payment, wire transfer and EFT (electronic funds transfer), but may not know how they differ. With more than 200 million wire transfers and over 29 billion ACH transfers sent in 2021, these networks are dominant forces in global payments and well worth exploring further.

We’ll explain the differences between ACH transfers, wire transfers and EFTs; how they’re used; and what you need to know about them for your business.

What's in this article?

• What is an ACH payment?
  
• What is a wire transfer?
  
• What is an EFT?
  
• ACH vs wire transfers vs EFT: How they’re different
  

What is an ACH payment?

ACH stands for Automated Clearing House, a centralized US financial network used by banks and credit unions to send and receive electronic payments and money transfers. ACH payments are electronic transfers of funds sent with the ACH network. Types of ACH transfers:

• ACH direct deposit
  Direct deposit is an ACH transfer that goes directly from the payer’s account to the recipient’s account. For example, if you work in the US and your pay cheque is deposited into your bank account automatically each payment cycle, you are probably receiving a direct deposit sent via the ACH network.

• ACH direct payment
  Whereas direct deposits are ACH payments that enter your account, direct payments are transfers that leave your account to go to another recipient. For example, if you send your monthly car payment electronically from your current account, the chances are that you initiate that payment with an ACH direct payment.

To learn more about making ACH payments, accepting ACH transfers as a payment method from customers, and the benefits of ACH payments for businesses, read our ACH payments 101 guide.

What is a wire transfer?

Wire transfers move funds electronically from one party to another, either directly between bank accounts or between people via a non-bank third-party wire transfer service. Wire transfers are a fast, reliable and secure way to transfer money domestically and internationally.

To learn more about domestic and international wire transfers, how they work and their pros and cons for businesses, read our Wire transfers 101 guide.

What is an EFT?

An EFT, which stands for electronic funds transfer, is a transaction that moves funds electronically between different financial institutions, bank accounts or individuals. Other common terms for EFTs include electronic bank transfers, e-cheques and electronic payments. While there are many different types of transfers that fall under the EFT umbrella, any electronic transfer of funds is considered an EFT.

Types of EFT:

• ACH transfers
  
• Wire transfers
  
• ATM transactions (withdrawals, deposits and transfers)
  
• Debit card transactions
  
• Peer-to-peer payments
  

From everyday consumer purchases and bill payments to employee payroll and moving large sums of money around the world, EFTs are woven into just about every part of our daily lives and have made it possible to move funds quickly and cheaply.

For a deep dive on EFTs, including their various uses, how long they take to process and how to use them for your business, see our EFT guide.

ACH vs wire transfers vs EFT: How they’re different

Think about it like this: EFT is a general term that encompasses all electronic payments. Since ACH and wire transfers are electronic payments, they’re considered EFTs but have a number of key differences:

• The network they use
  While the logistics of sending and receiving wire and ACH transfers are similar, the funds use completely different networks – governed and managed by different entities – to travel from point A to point B. Wire transfers are sent using the Federal Reserve Wire Network, also known as Fedwire. ACH transfers use the Automated Clearing House, which is administered by the National Automated Clearing House Association (Nacha), an independent organisation owned by a large group of banks, credit unions and payment-processing companies.

• Transaction costs
  Wire transfers tend to be more expensive than ACH transfers. Within the US, wire transfers typically cost up to $35, while international wire transfers cost between $35 and $50. ACH transfers are often free to send and receive, or they cost just a few dollars.

• Transfer time
  The cost disparity between ACH and wire transfers has a lot to do with the difference in transfer time. Wire transfers are settled individually in real time (or close to real time) and therefore cost more. ACH transfers are cheaper because they typically take longer to process and arrive at their destination. Wire transfers usually take a few hours to process, whereas ACH transfers can take up to four working days. In 2021, however, changes to Nacha’s operating rules expanded access to same-day ACH transfers. Today, many ACH transfers are delivered within one working day of being sent, minimising the long transfer time that was the biggest downside of ACH transfers.

• Where they operate
  Wire transfers can be used internationally, whereas the ACH network only operates with US-based bank accounts.