Many users doubt whether Zelle is an ACH transfer because many confuse it with this type of service. Zelle is part of the different P2P payment services that make it fast, easy, and secure to send money to your family or friends.
Like other renowned applications such as PayPal, Cash App, or Venmo, this offers people to send and receive money directly with their bank accounts, so it is often confused with an ACH service.
What is Zelle?
It is a digital payments network based in the United States and is owned by Early Warning Services, LLC. It is a privately held financial services company owned by Bank of America, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo.
The app is a payment gateway network that allows users to send and receive money directly into their bank accounts. It is an integrated service in the mobile app of more than a thousand U.S. banks.
When sending money through Zelle, we will not have any intermediaries because it will go directly to the users’ bank accounts.
Does Zelle work like an ACH transfer?
When we talk about Zelle, we are talking about an instant ACH transfer, but it is not a wire transfer. Money transfers made with the application will move money instantly between two bank accounts without any fees.
This application will instantly transfer money between two bank accounts without any fees. It is because it works with thousands of banks and credit unions, which means that even though it is an ACH transfer service, the money will be sent immediately. However, the transaction will finalize later through the normal ACH processing system.
What is the difference between ACH and wire transfer?
To move money between two banks there are ACH and wire transfers. The latter is usually instantaneous but at the same time will be more expensive. On the other hand, ACH transactions are usually free of charge, but the processing time is longer than the former.
However, by using Zelle, you can make a quick money transfer via ACH and let it complete later with normal ACH times.
What is an ACH transfer?
ACH is a network that includes more than 10,000 financial institutions. This network processes transactions such as direct debits, direct payments, direct deposits, electronic checks, and electronic funds transfers.
Transactions made through this network are divided into two categories of direct payments and direct deposits. The network can be used to pay suppliers and employees or for individuals to schedule and pay bills electronically.
These transfers also allow money to be sent to family and friends, and many payment applications use this payment network. These transactions are usually settled at the bank within a few business days, provided sufficient funds are in the account.
What is a wire transfer?
It is an electronic payment method that transfers money between accounts faster than ACH. These transactions are usually used to send large amounts of money, and there are no limitations as in P2P payments.
Wire transfers can be domestic or international; in the latter case, you must always send sums of money over $15. Domestic wire transfers are used to send money within the same country. They are usually processed the same day, within a few hours or even minutes. However, international wire transfers can take more than a day because they involve intermediary banks.
Key differences between the two types of transfers
Some key points are key to differentiate wire transfers from ACH transfers, which will be:
- Availability: ACH transactions can only be used for domestic transactions, while wire transfers allow money to be sent abroad.
- Security: Both offer the same protection, so the information will be protected. However, ACH transfers can be stopped, but wire transfers are difficult to cancel once initiated.
- Transfer limits: In both cases, the applicable limits will depend on the particular bank.
- Processing times: While wire transfers are processed the same day, ACHs can take 1-3 business days to process.
- Fees: ACH transactions are free, but with wire transfers, there is a $10 to $35 fee for each transfer initiated.
Why is Zelle a better option to direct bank wires?
Even though Zelle uses the ACH network to make your transactions, they usually arrive instantly. It makes them like bank wire transfers, but they can even be more efficient without bearing the costs of bank wire transfers.
However, it should be noted that to make a money transfer with Zelle, both banks must have an agreement with the platform. Otherwise, the instant transfer will not be possible, and you will most likely have to wait for ACH times.