These days, there are more ways for businesses and people to transfer money than ever before. The paper check has evolved into the eCheck, QR codes have turned into digital fingerprints, and money transfers can be initiated from your phone in seconds – sometimes to your detriment. That means it’s important for business owners to know the options that lay before them and see where they can save money and, perhaps even more importantly, time. Let’s break down what exactly ACH payments, eChecks, Zelle, and wire transfers are and why they matter.
Automated Clearing House (ACH)
Like most things in this world, the most reliable and time-tested method of transferring money is, of course, the least sexy. Enter the ACH, a network that allows banks to bundle together bank transfers within the US. If you’ve ever enrolled in direct deposit, paid a bill with automatic bill pay, or transferred money from your bank to other financial institutions (like a stock broker, another bank, or an app), you’ve used the ACH.
The ACH handles transactions in bulk, which has its own pros and cons. On the plus side, ACH almost always has the lowest rate to process transactions: the median cost to process a transaction was between 26 and 50 cents in AFP’s 2022 Cost Payment Survey. On the downside, because payments are bundled and the sheer mass of daily payments is enormous, it could take anywhere from 1-3 business days for a payment to get processed. ACH also offers same-day processing, but this benefit often comes with a per-item origination fee that varies based on your institution.
ACH is generally baked into a business’s business or merchant account at their financial institution and is likely the default method of transferring money to other US banks. If you are sending or receiving money outside the US, however, you’ll be required to use another service.
eChecks are processed by ACH and, fundamentally are a type of ACH payment. eChecks require a customer to provide bank authorization (usually from an online form). The business then inputs this information into their merchant account and makes an ACH debit request from the customer’s account.
A relative newcomer to the payment space, Zelle is a unique app that’s tied to a US bank account. You can only use it if both parties in a transaction have banks that are part of Zelle’s network.
Zelle works by instantly transferring money from one bank account to another within minutes (Zelle is arguably short for gazelle) without any fees. But because Zelle is tied to your bank account, you can only pay with funds immediately onhand. Since you can’t cancel a payment that’s started, it’s crucial to confirm the account you’re sending money to is the right one.
Zelle is currently free, though according to the fine print, banks are free to add a service fee if they choose.
For all the features that Zelle can provide, it possesses numerous drawbacks: first, it’s not universally accepted. While every bank and credit union in the US can receive ACH and wires, Zelle transfers are exclusive to banks and approved accounts. Second, due to the amount of irreversible fraud that’s occurred using Zelle, payments to new contacts are often restricted to small amounts and can only be increased with repeat transactions. And finally, Zelle is too new to be automatically integrated with most people’s accounting software. Entries can be manually uploaded and commented on “Paid with Zelle”, but you lose all the time-saving features that come with integration.
A wire transfer is a direct, one-time transfer between two institutions. Wires are almost always used to send money internationally, since a wire is the sole form of communication between most banks that aren’t in the same country, but domestic wires can be sent when a speedy transaction is crucial.
Because these payments aren’t bundled into batches or automated, they incur high fees (the sender of a wire transfer almost always gets charged a fee; the recipient’s financial institution may charge them a fee to receive it as well). Wire transfers can transfer money more quickly than ACH. But the double-edged sword is that, depending on your bank, you may have a limited time to cancel an erroneous wire transfer, if at all.
As the originator (or sender) or a wire transfer, you will likely incur a fee to send a wire transfer, which can be a flat fee, a percentage of the transaction, or both. Forbes reports the median outgoing domestic wire transfer fee costs $25, while the median outgoing international wire transfer fee costs $42 according to Bankrate. Because wire transfers are also nearly impossible to cancel, some banks may require heightened account verification when sending large wire transfers. It’s also crucial that all of the recipient's bank information be copied correctly.
Incoming wire fees can cost up to double digits for the recipient, based on their bank’s particular fee structure — which essentially puts everyone in a lose-lose position. The sender pays wire transfer fees, the recipient pays wire transfer fees, and if there are any intermediary bank fees along the way, those get saddled on the recipient as well.
The Best Way to Pay International Invoices
With wire transfer fees costing the sender and receiver for every payment, Liquid believes businesses need another way to pay their contractors and vendors.
With Liquid, users can make unlimited international wire transfers with no per-transaction fee. Liquid makes sure your vendors will receive the full amount of their invoice — because when your team is happy, you get better work.
Try Liquid today and unlock free international wire transfers and more, like automated invoice matching, spend management controls, and dedicated vendor portals.