Electronic funds transfer vs wire transfer: Your guide

Article summary

Electronic funds transfer (EFT) and wire transfer are among the most common methods for sending money.

Whether you’re sending remittance to support your family or surprising a loved one with a cash gift, EFTs and wire transfers can help you transfer the funds reliably, to where they’re needed most. But what is the difference between a wire transfer and an electronic funds transfer?

Read on to discover the benefits of an electronic funds transfer vs a wire transfer and find out which method is right for you.

In this article

• What is an electronic funds transfer?
• What is a wire transfer?
• What is the difference between a wire transfer and an electronic funds transfer?
• Electronic funds transfer vs wire transfer: which is right for me?

What is an electronic funds transfer?

An electronic funds transfer (EFT) is a digital transfer of money from one bank account to another, using a computerized network. These money transfers are processed through the Automated Clearing House (ACH) and Federal Reserve system, making them more reliable than traditional paper methods – like cash or checks.

Anyone can use an EFT payment. In fact, EFTs have become an integral part of our daily life. They can be used to deposit a pay-check in your bank account, set up a one-time payment for card purchases and send bill payments through to your energy suppliers.

There are several types of electronic payments that fall under the EFT umbrella term, including:

• Direct deposits – such as pay-checks or social security checks. They can also pre-authorize withdrawals for monthly insurance and bill payments.
• ATMs – initiate electronic transfers when you withdraw money, deposit cash or move funds between accounts.
• Credit/debit card payments – can be used to make one-time purchases or regular payments online, in person or over the phone.
• Online money transfers – send money to a loved one via online banking, or peer-to-peer payment apps.
• Telephone money transfers – call your bank or financial institution and request they transfer money to a specific account.

Want to know more? Check out our guide to electronic funds transfers for further details on how EFTs can help you send money.

What is a wire transfer

Wire transfers are a specific type of EFT, where payments are sent from one bank account to another through messaging networks like SWIFT or Fedwire. They can be processed directly through your bank or using a third-party money transfer service.

There are two main types of wire transfer:

• Domestic – a wire transfer that takes place between two banks within the same country. Funds are often processed, sent and received on the same day, as they only have to go through the domestic ACH.
• International – a wire transfer that goes beyond borders, and is settled in a different country to the one it started in. For example, if you initiate a payment from the US to the UK. You can expect international wire transfers to take slightly longer, due to multiple clearance stages.

For more details, take a look at our guide on how to make a wire transfer.

What is the difference between a wire transfer and an electronic funds transfer?

Now you know the basics around how EFTs and wire transfers work, it’s time to compare the two to better understand their benefits. Here is a breakdown of the key differences between a wire transfer and an electronic funds transfer.

Speed

Wire transfers are your go-to for sending money fast. If you’re transferring money within the US, wire transfers can often be processed, sent and settled instantly, making them ideal for urgent financial support. International wire transfers can take slightly longer, at around one to two business days or more.

Other EFT processing timeframes vary depending on the type of electronic transfer. ATMs can offer instant withdrawals and cash deposits, while direct debits are usually ready by the next business day.

Reliability

Both EFTs and wire transfers are more reliable alternatives to paper checks. An EFT often requires a personal identification number (PIN), password or two-factor authentication before you can start.

Similarly, bank wire transfers ask that both the sender and receiver have their own registered bank accounts, which often involve identity verification to prevent fraudulent activity.

Always make sure you know and trust the person or company you are transferring money to, and double-check you’ve inputted the correct details before proceeding.

Transfer fees

Wire transfers tend to have slightly higher transfer fees than other EFTs as they are often processed faster. Rates typically range from $15 to $50 – with domestic wire transfers costing less than international ones. These costs usually vary from bank to bank, depending on the transfer amount and whether you are sending or receiving.

Other EFTs, such as telephone transfers, tend to have higher fees associated with them, while debit card transactions can often be fee-free.

Processes

There are some subtle differences to the money transfer process for an electronic funds transfer vs a wire transfer. While an EFT physically moves money from one bank account to another, a wire transfer takes a more passive approach.

During a wire transfer, the remitting bank uses secure messaging to instruct the receiving bank to deposit its reserve funds into the receiver’s account – based on the account details provided. The details can then be settled between the two financial institutions.

Electronic funds transfer vs wire transfer: which is right for me? 

There’s no one-size-fits-all solution for transferring money – the requirements can vary from person to person, depending on their situation and the receiver’s circumstances.

A business owner looking to pay their vendors and employees will have different priorities to someone who is looking to provide urgent financial support to a family member or friend overseas. So their preferred money transfer method will usually differ too.

Here are some of the main factors to consider when choosing between a wire transfer and other EFTs:

• Time – wire transfers are often favored over other types of EFTs if you need the money to arrive urgently.
• Cost – if your payment isn’t as urgent, you might be able to use an EFT with lower transfer fees than a wire transfer.
• Amount – think about how much money you want to send. Wire transfers are recommended for sending larger amounts, as they have more rigid measures to help protect your funds.
• Purpose – a one-off payment to a friend might work via a wire transfer, but what if you’re transferring money for a business that needs to pay multiple employees? In this case, EFT payments are normally used to set up automatic deposits into the different accounts.

FAQs and guides

• What information is needed for a wire transfer?
• Wire transfer vs bank transfer: What’s the difference?
• Can I wire money from my bank?
• Can you do a wire transfer online?