1. ACH payment overview
2. EFT payment overview
3. Wire transfer overview
4. EFT payments vs. ACH payments vs. wire transfer payments
5. Best payment method for B2B

If you own a business and make–or receive–large payments, you are most likely aware of ACH, EFT, and wire transfers. Even for those who make use of these types of payment methods on a daily basis can have some confusion about the small details that differentiate them.

In this brief guide, we’ll attempt to provide some clarity for business owners and the general public alike by answering this question: What’s the difference between ACH, EFT, and wire transfer payments?

ACH Payment Overview

An ACH payment–or Automated Clearing House–is an increasingly popular means of paying for goods or services through electronic means. It is a way of transferring money between financial institutions through what’s referred to as the ACH financial network. This method of moving money between bank accounts is frequently used because of its relative speed and consistency when paired against other, more traditional payment types. More so, ACH payments can be cheap and are a simple way of moving toward automating a business’s accounting.

To learn more about ACH payments, refer to What is an ACH Payment, How Does It Work, & How to Set One Up. 

Biggest Benefit of ACH Payments

There are lots of great reasons to make payments with an ACH transfer–relative ease of use, flexibility, etc.–the biggest benefit is the low cost. Because different financial institutions can charge different amounts for ACH payments, there’s no true standardization of the cost, but in general ACH payments are almost always cheaper than credit card fees. There are many ACH payment processing companies that are free, and even if you have to pay an additional fee, the cost is usually small enough to be negligible. 

Biggest Challenge of ACH Payments

Like any payment method, there are challenges in paying via ACH. The biggest of these challenges is security. Advances in payment technology continues to increase the speed of ACH payment processing–in some cases within the same day–and as speeds increase, so does the opportunity for fraud. 

More so, there are a handful of steps involved in processing an ACH payment and at each of these steps, a different security portal is typically used. Different portals mean different opportunities for security breaches. That said, there are methods to help lessen the security risks for ACH payments and when considering using ACH as a means of payment, every business should look into them.

EFT Payment Overview

An EFT is an electronic funds payment, meaning any payment method that transfers funds between bank accounts is considered to be an EFT payment. EFT payments can be within the same financial institution or between two different ones. Either way, EFT payments are–as the name explains–always electronic in nature. EFT payments aren’t a specific type of payment, but rather an umbrella term that includes a handful of payment methods–direct deposit, ACH, debits or credits, etc.

Biggest Benefit of EFT Payments

The most commonly referred to benefit of an EFT payment is how it improves cash flow. Where payment methods like a check come with associated time lags based on labor and processing, EFT payments are both fast and consistent with when payments are needed. The ability to know exactly when you’re getting paid allows businesses to better forecast the availability of cash on hand and to plan large purchases accordingly. Additionally, EFT payments are fast and, for the most part, reliable. 

Biggest Challenge of EFT Payments

While EFT payments are fast and allow more control over cash flow, the speed of a wire transfer can cause some issues if a business doesn’t have the necessary cash on hand. Instantaneous, or extremely fast processing speeds mean that a business has to have the money on hand as soon as the EFT is sent, or they can face overdraw fees or “bounced” payment fees. When looking at the vast array of types of EFT payments, consider the fluidity of your cash flow and if your business will be able to back up the electronic funds payment at the time of purchase.

Wire Transfer Overview

A wire transfer is a fast, secure method of EFT. Much like an ACH, a wire transfer is a means of sending cash electronically from one location to another. In wire transfers, money is passed domestically or internationally through a network of banks and transfer service. Like all EFTs, there is no physical cash actually transferred, all funds are deposited and received electronically. 

Biggest Benefit of Wire Transfer

Wire transfers, much like all EFTs, are fast and secure. Wire transfers are electronic fund transfers used in large transfers of cash because they typically have higher cap limits. Similarly, wire transfers are easily tracked from start to finish, allowing a sense of security and ease of mind for moving large amounts of money from one place to another. 

Biggest Challenge of Wire Transfer

Simply put: wire transfers can be expensive. There is more labor and processing involved in using a wire transfer to make payments, and the extra time and effort can increase the cost to an untenable amount for some businesses. 

With that in mind, wire transfers do have an increased error potential due to the amount of processing. More steps means more opportunity for error and wire transfers often involve many payment portals and many hands to get them from point A to point B. 

EFT Payments vs. ACH Payments vs. Wire Transfer Payments

Though each of these payment methods are similar to each other, there are subtle differences that should be noted before a business decides to use one versus another.