My sponsors have two ways to transfer money. I wonder what's the difference?
Below are some of the differences between FedWire credit transfers and ACH credit transfers in the US.
Same day clearing, which means the sender's account is debited and your account is credited on the same day
Irrevocable. Once a FedWire is sent, the originator/sender cannot send a reversing transaction. This is a huge advantage of using FedWires because it mitigates risk of reversals.
Cost. FedWire typically cost more to send and to receive
ACH Credit (aka Direct Deposit)
- Next day clearing. Settlement or clearing typically takes place Next Banking day.
- Inexpensive. Little or no cost to send and receive. (Costs, if any, depend on your banking relationship and the fees your financial institution may charge)
Allows for Reversals. Sender/originator does have the ability to perform reversals or correcting entries.
Batch Processing ACH entries are group together into batches and processed by Financial Institutions and the ACH Operators in batch mode.
You can find additional information regarding ACH at http://www.achrulesonline.org/ and FedWire at http://www.frbservices.org/serviceofferings/fedwire/fedwire_funds_service.html
Because a wire transfer requires the individual bank to bank process, it is usually more expensive than an automated clearing house, which requires minimal involvement by individuals at financial institutions. Many ACH transactions come with only a small fee, or even no fee at all, since they are run with more efficiency. However, if you want a better guarantee that your money will arrive on time, it might be worth it to pay the wire transfer fee.
With both cases, it is possible for errors to be made. However, since you often get to review the information before it is sent with a wire transfer, the method is a little more secure. Also, because identities are verified with wire transfers that take place between bank accounts, there is less chance of fraud. Wire transfers that take place between financial institutions are generally considered quite secure.