Bank Transfer | B2B Finance Glossary
What Is A Bank Transfer?
A bank transfer is a payment method that allows individuals and businesses to transfer money from one bank account to another. Bank transfers can be sent from one of your internal accounts to another, from your payments processing account to your bank account, and from your bank account to an external account.
Automated Clearing House (ACH) transfers are one of the most common forms of domestic bank transfers, and they're initiated online and facilitated by the Automated Clearing House, run by NACHA. The ACH network enables payments among over 10,000 financial institutions in the US and makes it possible to make direct deposit payments and direct payments.
Direct deposits are usually used for salary payments, tax refunds, annuities, and interest payments. These payments are most commonly initiated by government entities and businesses instead of individuals.
Direct payments are made between bank accounts using the credit and debit system. The funds are withdrawn from the payer's account and deposited directly into the payee's account.
What Is A Wire Transfer?
Bank transfers are commonly confused with wire transfers. Here's what sets a wire transfer apart: a wire transfer is a payment method that makes it possible to send money directly from one bank account to another from anywhere in the world. Wire transfers are powered by EFT technology and eliminate the need for paper-based payment methods by making it possible for any two individuals, companies, or other parties to send and receive payments securely and quickly.
During a wire transfer, the bank acts as the middleman between the sender and the receiver of the payment: the sender sends the wire payment amount to their bank, then the bank sends the money to the recipient's bank, and finally, the payment is sent to the recipient. To enable a wire transfer, the sender must pay for the transaction. Next, the sender's bank sends a message through a secure system (also known as SWIFT) to the recipient's bank, and this message includes the essential information needed for the transfer to go through, such as the details of the sender and recipient and the total amount of the wire transfer that's being made.
What Is The Difference Between A Bank Transfer And A Wire Transfer?
Even though bank transfers and wire transfers allow funds to be transferred from one bank account to another, these payment services are very different. For example, bank transfers require bank accounts to be linked to one another to initiate a funds transfer. On the other hand, wire transfers do not require bank accounts to be connected.
Here are a few more of the most critical distinctions between wire transfers and bank transfers:
- Ability to send international payments. ACH payments are a form of bank transfer. Wire transfers and ACH payments make sending money across the country possible. However, wire transfers can be sent internationally, while typical bank transfer payments cannot. It's important to know that ACH payments do have a partner network called Global ACH, which offers international bank-to-bank payments; however, wire transfers are much more popular for international payments.
- Speed in which funds are transferred. Wire transfers offer the fastest payment times when sending money domestically, and funds are usually available within the same business day. ACH payments typically take longer, and funds sometimes don't appear for as long as five days. However, bank transfer payments are usually completed within 24 hours.
- Cost of transferring funds. Typically, bank transfers are cheaper than wire transfers; sometimes, bank transfers are free. However, ACH payments usually cost between thirty thousand and ten dollars, while wire transfers usually cost twenty-five and fifty dollars. While most wire transfer fees apply to the sender, there is also sometimes a small fee that recipients must pay to receive the funds in their accounts.
- Payment security and inherent risks. ACH transfers are usually considered the safest form of payment method for senders. This is mainly because if ACH transfers are sent incorrectly, they can be reversed. Additionally, scams that use ACH payment methods are usually easier to identify since these types of scams require much information to be initiated. Wire transfers are generally perceived as less secure since they are impossible to reverse, even in the face of fraud.
What Are The Limits On Bank Transfer Payments?
Different types of bank transfers have other limits. Wire transfer limits are usually incredibly high, which is why they are the preferred form of payment for large transactions. Here's what the limits of common bank transfers look like:
- ACH same-day transfer: Up to $1,000,000
- Capital One Financial Corp.: Up to $10,000 per day or $25,000 per month
- JPMorgan Chase & Co.: Up to $25,000 per day
- Bank of America Corp.: $3,500 per day or $10,000 per week
- Citigroup Inc. Standard ACH: Up to $10,000 per day
How Secure Are Bank Transfers?
Bank transfers are usually considered to be a secure form of payment. This is because, to initiate a bank transfer, a process for proven identity verification must be undergone to initiate the transfer. Still, the payer needs to confirm the payee's identity before sending the transfer. When starting a bank transfer, always double-check the name and information of the recipient – even if you're making a bank transfer to one of your accounts.