Blog|9 min

Wire Transfer vs. Direct Deposit: What's the Difference?

Kelly Kipkalov
Bill.com, Sr. Director, SMB Product Marketing

If your business wants to make or receive electronic payments, the choice of using wire transfer vs. direct deposit can seem confusing at first, but here’s the bottom line:

Direct deposit is best for just about any payment between U.S. banks, credit unions, or other financial institutions. It’s much cheaper, it's marginally more secure, and, in some cases, it can be just as fast as wire transfers. Bill.com makes it easy.

For international transfers, you can’t always use the direct deposit system, but you can still use Bill.com to make those payments electronically. In fact, Bill.com makes international payments just as easy as domestic ones.

If you want to learn more about the pros and cons of these alternatives, this article on wire transfer vs. direct deposit will walk you through the details, helping you choose the right payment method for your specific business and situation.

What is a Wire Transfer?

A wire transfer is a fast and easy way to send personal or business funds to another individual (or company) anywhere in the world. If you’re familiar with Western Union, that’s a wire transfer. But you can also deposit and wire money through any large bank in the U.S. or abroad to any destination.

Wire transfers are extremely quick. Transferred money often arrives the same business day, and just about any financial institution will offer a service that can send a wire transfer for you.

Unfortunately, the service is also extremely costly, sometimes with fees from both banks, on both sides of the transaction.

Traditionally, the major advantage of a wire transfer was its speed. They can still be used today for any large single transaction, like the purchase of a home, when a significant balance needs to be wired between parties at a specific time.

For example, wire transfers are often used by legal agencies in a real estate closing for the issuance of the purchase price consideration from the mortgage holder to the seller. Because wire transfers are so costly, they're only preferred when the goal is for large amounts of money to change hands in short periods of time, the withdrawal debited from the payor and the deposit credited to the payee extremely quickly, making the assets available almost immediately.

Wire transfers can make funds available in a matter of hours, with no formal governance or economic oversight from any centralized organization. Advance verification of routing numbers and account numbers is vital because those dollars, once wired, can not be called back.

What is Direct Deposit?

A direct deposit is also a fast and easy way to make electronic payments, but it’s much less expensive because it uses the ACH transfer system.

ACH stands for Automated Clearing House, a banking network throughout the United States that sends and receives payments from one financial institution to another. Trusted for almost 50 years now, the network includes banks, credit unions, and even the Federal Reserve, routing huge numbers of payments across the U.S. every day in clearing house batches—meaning payments are batched together for automated processing.

You can send or receive a direct deposit from just about any bank in the United States to any other, using the same system the federal government uses to make Social Security income payments to retirees and to deposit tax refunds directly into U.S. checking accounts.

Companies might use them to collect automatic payments from a customer, for example on car loans, credit cards, or other types of billable consumer payments. It's also a common convenience for an employer that needs to deposit employee paychecks for its workers, as well as for the automatic collection of corporate payroll taxes by the government.

For customers and clients, it's an easy, automatic way to pay that monthly statement. For companies, it offers the convenience of paying those weekly or monthly billable statements from merchants without the need for physical checks, as well as a way to improve customer experience and reduce individual transaction problems by collecting recurring payments automatically.

The standardized efficiencies of electronic transfers through the ACH system can provide a professional advantage for any finance administration. With a little planning, it also gives any employer the option of paying salaries and wages via the same automatic systems, benefiting workers while also providing the business with lower payroll time and cost.

The major limitations of direct deposit are that the ACH network can not always be used to send funds recipient in another country, and that the ACH regulating bodies currently limit the amount of a same-day ACH deposit to $100,000—another reason wire transfers are used for the purpose of large transactions like mortgage loans and certain investing transactions.

Are Wire Transfer and Direct Deposit The Same?

So, does wire transfer vs. direct deposit really matter? Are they basically the same thing?

It does matter, and they’re not the same thing. But they do have some related similarities:

  • They’re both reliable electronic payment methods

  • They’re both faster and more secure options than paper checks

The whole wire transfer vs. direct deposit debate used to be more complicated than it is today, making the information you’ll find on the internet even more confusing.

For example, some sites will tell you that wire transfers will provide faster service, but some ACH transfers are now processed and deposited on the same day. Also, wire transfers were traditionally preferred for one-time-only transactions, but the automated clearing house system is so convenient now that it can often provide one-time transfers.

Here are the bottom-line wire transfer vs. direct deposit differences that still exist today:

  • Institutions charge MUCH more for wire transfer vs. direct deposit, with higher fees on both sides of the financial transaction

  • ACH payments are not always available internationally

  • ACH payments run through a clearing house for an extra layer of security

  • In some cases, authorities can recall ACH funds if there was a mistake

  • National Automated Clearing House Association (NACHA) rules limit the size of same-day ACH transfers to $100,000

So if you want to send money within the U.S., from one U.S. financial institution to another U.S. financial institution, direct deposit is usually the best way to do it. Your vendors will be paid within 2-5 business days—or more quickly with same-day options—it's less expensive, and the ease and convenience is significant.

If you need to send money overseas, whether to Europe or any other international destination, you can’t always use ACH, but you can still use Bill.com.

In fact, if you’re specifically interested in making international payments, Bill.com is one of the best ways to pay vendors in other countries.

How Long Does a Wire Transfer Take?

When wire transfers will be complete depends where those funds are going.

Wire transfer times are extremely fast when sent domestically. Transferred money can be deposited as quickly as the same day, but domestic wire transfers are still much more expensive than direct deposit, with higher fees that can apply on both sides of the financial transaction.

That’s one of the reasons why people historically tended to use wire transfers only for certain types of large, individual transactions or when they needed to send money in emergencies, such as sending personal funds from a checking account via Western Union.

When used internationally, a wire transfer usually takes more time and the transaction is even more costly. Banks charge an average wire transfer fee of $38.**

The transaction has to be cleared on both sides, and the process is usually not transparent to the sender: money goes in one end and eventually comes out the other, only reaching the recipient after significant fees and a costly exchange rate with unfavorable terms.

With Bill.com, international payments are a lot more transparent, letting you track where your money is in the process, with no wire transfer fee* for payments to vendors in local currency.

How Long Does a Direct Deposit Take?

What about wire transfer vs. direct deposit when it comes to domestic payments? How does the speed of these methods stack up?

Today, domestic ACH payments can operate just as quickly as wire transfers. Despite the added security layer of the clearing house, it isn't as though Federal Reserve authorities have to check anything manually. The clearing process is automatic.

Funds can sometimes be cleared, processed, and accounted for in a matter of hours, deposited and available to the recipient the same day, and direct deposit is much less costly than traditional wire transfers.

In addition, the possibility of reversal makes direct deposit somewhat more secure.

Once you’re set up in Bill.com, you’ll be able to make ACH payments to any U.S. bank account via direct deposit. All you need is the routing number you’re sending the payment to.

Most ACH payments clear in 2-5 business days, but for a nominal fee, you can usually make those funds available the same day when you need to.

Bill.com Difference

In the end, wire transfer vs. direct deposit is something of a moot debate since you can use Bill.com to send payments either way. But there are a lot more reasons to use Bill.com direct deposit than just saving money.

For one thing, customers using Bill.com report saving, on average, 50% of time on accounts payable.

Why? Because Bill.com isn’t just a payments processor. It’s an intelligent business payment platform that uses advanced technology to save you time. In addition, it integrates with the most popular corporate accounting systems, significantly reducing the potential human errors of manual, dual entry.

Invoice entry is extremely easy, with several convenient options:

  • Vendors can email invoices directly to your Bill.com inbox

  • You can drag and drop an invoice into the system on your computer

  • You can even snap an invoice photo and add it through your phone

Once the invoice is in the system, your Intelligent Virtual Assistant (IVA) goes to work, reading that invoice and entering the data automatically for your review.

Then, Bill.com routes it through your approval process, using your own custom workflows. Want to automate your regular electric bill but require additional verification of 3 high-level approvals for that big contractor? No problem.

Bill.com gives you the flexibility to work the way you need to, allowing you to set up rules that oversee compliance with your approvals systems. The platform can also be accessed anywhere, letting you request approvals remotely and receive them via our mobile app (for Apple or Android phones), no matter where that approver is in the world.

If anyone has questions about a bill, Bill.com saves that communication with the bill for easy reference, along with the invoice itself and any other related documentation in a single file storage solution, and it always shows you where each bill is in the payment process.

Better yet, Bill.com automatically stores a detailed audit trail for extreme transparency and visibility in your AP process. Every step is accounted for, and every interaction related to each bill is captured in the permanent file.

Batched payments run through Bill.com via virtual card, ACH, or international wire transfer. We’ll even print and mail physical checks for you when your vendors require it.

No matter how you send that payment, your banking information remains confidential from your vendors, and batching makes your monthly close fast and easy.

“Prior to implementing Bill.com, the AHS team spent almost a week each month processing paper, matching each of the invoices to a single check. Now the process takes just one hour in addition to dramatically reducing the time the CFO spends in the approval and signing of checks.” — Diana Westrop, Controller, Atlanta Humane Society


* Local currency payments only. Subject to restrictions. Other fees may apply.

** Based on the average published outgoing international wire transfer fee charged by the top 10 U.S. banks according to the FDIC, for payments in local currencies. This fee excludes currency conversion rates.


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