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ACH vs. EFT vs. Wire Transfers: What’s the Difference?

When it comes to sending money from one bank account to another, you’ve got options. The three main ways to electronically transfer funds are ACH transfers, EFT transfers, and wire transfers. But what’s the difference, and how do you know which one to use?

Here at Delancey Street, we help our residents build new lives and new skills. Part of that is learning how to manage finances and make payments responsibly. So we’ve put together this guide to break down the pros and cons of each type of bank transfer.

ACH Transfers

ACH stands for “Automated Clearing House.” It’s a secure network that banks use to electronically move money between accounts. ACH transfers are commonly used for:

  • Direct deposits of paychecks
  • Automatic bill payments
  • Tax refunds from the IRS

The main pros of ACH transfers are that they’re free and convenient. As long as you have the routing and account numbers, you can schedule recurring transfers on your bank’s website or app. The downside is that they take a couple days to process. So you can’t count on the money being available right away.

For example, if you scheduled an ACH transfer on Monday, the funds wouldn’t be withdrawn until Wednesday or Thursday. And they might not show up in the recipient’s account until Friday. So you need to plan ahead.

EFT Transfers

EFT stands for “electronic funds transfer.” This includes any transfer of money initiated electronically instead of using cash or checks. So technically, ACH and wire transfers are types of EFTs. But most people use EFT to refer to debit card or online payments.

When you use your debit card at a store, for example, that’s an EFT transfer. The money comes directly out of your checking account and goes to the merchant. EFTs via debit card happen instantly. But if you pay a bill online using your routing and account number, it still takes a couple days like an ACH transfer.

The main benefit of EFTs is convenience. You don’t have to worry about carrying cash or remembering to mail checks. Whether you’re shopping online or grabbing coffee at the corner cafe, just tap or swipe your card. The downside is you lose some of the security features of paper checks.

Wire Transfers

Wire transfers are electronic funds transfers that utilize a bank’s wire transfer system. This allows for real-time movement of funds, which makes wire transfers the fastest option. The money is available to the recipient on the same day.

Wire transfers are useful when you need to send a large amount of money quickly. For example, you might wire funds to put a down payment on a home. Or if you won the lottery and wanted to share your winnings with family members right away!

The biggest downside is that wire transfers tend to have higher fees, usually between $10-$50 per transfer. So they aren’t very cost effective for smaller, routine payments. They also require more security procedures like ID verification and account number confirmation.

Key Differences

Here’s a quick rundown of the key differences:

  • Speed: Wire transfers are fastest, ACH is slowest.
  • Cost: Wire transfers are most expensive, ACH is cheapest.
  • Security: Wire transfers require the most verification, ACH and EFTs are easier to set up.
  • Use cases: Wires for large urgent transfers; ACH for routine batches; EFTs for point-of-sale.

Tips for Choosing Your Transfer Method

So when should you use each type of electronic funds transfer? Here are a few tips:

  • Use ACH for regular automatic payments like utility bills.
  • Use EFTs for everyday spending and online purchases.
  • Use wire transfers for large urgent payments or moving money overseas.
  • Check your bank’s fee schedule – wires can be expensive.
  • Make sure you have the correct account and routing numbers to avoid errors.
  • Leave buffer time for ACH transfers to avoid late payments.

The world of electronic payments can be complex. But once you understand the key differences between ACH, EFT, and wire transfers, you can choose the right option for each money transfer scenario.

Here at Delancey Street, we’re always happy to help our residents manage finances and make sound payment decisions as they gain skills for independent living. Reach out if you need guidance navigating your bank account options and features.

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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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