U.S. Payment Methods: ACH vs. SWIFT vs. Wire, Which is Better?

Written by
Lou Zarcal
Published on
July 4, 2023
U.S. Payment Methods: ACH vs. SWIFT vs. Wire, Which is Better?

In the world of finance, there are different ways to transfer money from one account to another. Some of the most common methods are ACH, wire transfers, and SWIFT transfers. Each of these methods has its own advantages and disadvantages, so it's important to understand how they work and when it's best to use them.

ACH

What is it?

ACH stands for Automated Clearing House. It is an electronic network used by banks and financial institutions in the United States to process financial transactions between different accounts. This method allows for the transfer of funds from one bank account to another, and it can be used for both individual and business transactions.

What exactly is happening?

When a customer initiates an ACH transfer, the funds are transferred from their account to the receiver's account through the ACH network. The transaction is processed electronically, and it typically takes 1-2 business days for the funds to be credited to the receiver's account.

What are the pros?

One of the main advantages of ACH transfers is that they are typically less expensive than other methods. In many cases, banks will allow customers to initiate ACH transfers for free, or for a fee that ranges from $0 to $5 per transaction. ACH transfers are also a good option for recurring payments, such as mortgage or rent payments, because they can be scheduled in advance.

What are the cons?

One of the main disadvantages of ACH transfers is that they can take 1-3 days to process. If you need to transfer funds quickly, ACH transfers may not be the best option. Additionally, ACH transfers can be reversed if there are insufficient funds in the account, which can be problematic if you are relying on the transfer to go through.

When is it best to use this method?

ACH transfers are best for recurring payments, such as rent or mortgage payments, or for transferring funds between personal accounts. They are also a good option if you don't need to transfer funds immediately.


Wire

What is it?

Wire transfers, also known as bank transfers, are another method for transferring funds from one account to another. This method is typically faster than ACH transfers, possibly receiving it on the same day, but it can also be more expensive.

What exactly is happening?

When a customer initiates a wire transfer, the funds are transferred from their account to the receiver's account through the banking system. Wire transfers can be processed domestically or internationally, and they are typically completed on the same day that they are initiated.

What are the pros?

One of the main advantages of wire transfers is that they are faster than ACH transfers. You can receive your transfer on the same-day up or up to 2 business days. If you need to transfer funds quickly, wire transfers can be a good option. Wire transfers are also a good option for international transactions, as they can be processed quickly and securely.

What are the cons?

One of the main disadvantages of wire transfers is that they are typically more expensive than other methods. It can cost $10 to $35 per transaction. Banks may charge a fee for initiating a wire transfer, and there may also be additional fees for receiving the funds. Additionally, wire transfers can be subject to fraud and other security risks, so it's important to take precautions to protect your account information.

When is it best to use this method?

Wire transfers are best for situations where you need to transfer funds quickly, such as for an emergency or a time-sensitive payment. They are also a good option for international transactions, where speed and security are important.


SWIFT

What is it

SWIFT is a network that enables financial institutions to securely send and receive messages related to financial transactions. When a customer initiates a SWIFT transfer, the funds are transferred from their account to the receiver's account through the SWIFT network. The SWIFT network serves as a messaging platform, allowing banks to communicate with each other and process transactions.

What are the pros?

One of the main advantages of using SWIFT is that it is a secure and reliable method for processing international transactions. The SWIFT network uses advanced security measures to protect customer information and prevent fraud. Additionally, SWIFT transfers can be processed within 2-5 business days. This makes SWIFT transfers a good option for transactions that require speed and security.

What are the cons?

One of the main disadvantages of using SWIFT is that it is typically more expensive than other methods for transferring funds, ranging from $15 to $75 per transaction. Banks may charge a fee for initiating a SWIFT transfer, and there may also be additional fees for receiving the funds. Additionally, not all banks are members of the SWIFT network, which can limit the availability of the service.

When is it best to use this method?

SWIFT transfers are best for international transactions that require speed and security. They are particularly useful for high-value transactions, such as cross-border payments, and for businesses that regularly make international transactions. However, SWIFT transfers may not be the best option for low-value transactions, as the fees associated with the service may be higher than the value of the transaction. Additionally, customers should ensure that both their bank and the receiving bank are members of the SWIFT network before initiating a transfer.

Overall, the most cost-effective and expeditious method for transferring funds domestically is ACH. If you are receiving payments from U.S.-based employers, Parallax offers the option to receive these payments via ACH at no cost to you. Parallax also allows you to convert these payments into stablecoins, providing a faster and less expensive alternative for making cross-border payments.

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