EFT vs. ACH: What Are the Pros and Cons of Each?

Let's say that you're a professor of film studies and you require access to a text on Clueless character Cher Horowitz and the construction of the female antihero. You might drive to a colleague's house to pick up a copy, request delivery by mail or interlibrary loan, or access a scanned copy online. Your decision will probably be based on cost efficiency, speed of delivery, and security of the delivery method.

Security, cost, and speed are also some of the factors business owners might consider when deciding whether to use an automated clearing house (ACH) transfer or another type of electronic fund transfer (EFT) to send and receive electronic payments. A subset of EFTs, ACH transfers provide cost efficiency and security in exchange for slightly longer processing times than those required by other types of EFT.

What is an electronic fund transfer (EFT)?

An electronic fund transfer is, as it sounds, the movement of funds from one bank account to another, electronically or digitally. ATM deposits and transactions, wire transfers, credit card transactions, ACH transfers, and direct deposits are all examples of electronic fund transfers.

What is an automated clearing house (ACH) transfer?

ACH transfers are one common type of EFT. They are transfers sent through the ACH network, an electronic network that serves as an intermediary between financial institutions. The ACH network is responsible for processing and organizing ACH transfers, and is maintained by an organization called the National Automated Clearing House Association (NACHA), a 501(c)(6) not-for-profit association connected to approximately 11,000 different financial institutions.

EFT vs. ACH: How do they compare

ACH transfers are EFTs made using the ACH network. For this reason, all ACH transfers are EFT, but not all EFTs are ACH transfers.

Wire transfers, credit card transactions, and ATM transactions, for example, are types of electronic funds transfers that don't use the ACH network. These transfers are classified as EFTs, but not as ACH transfers.

Although ACH transfers have a lot in common with other types of EFTs, the cost, speed, and security parameters vary across EFT methods. Understanding the pros and cons of each can help business owners determine which transfer types best suit their needs.

Cost

How they're similar: Both ACH and EFTs can involve processing fees that are calculated either as a flat rate per transaction or as a percentage of the total transaction amount. Transfer fees are determined by your financial institution or by a third-party payment processor like PayPal or Zelle.

How they're different: ACH transfers are processed in batches, which means they tend to come with a lower per-transaction cost than other types of transactions. EFTs, like credit card payments and wire transfers, for example, frequently come with a high per-transaction cost—in the case of wire transfers, it can be $15 or more per transaction.

Speed

How they're similar: Both ACH transfers and other types of EFTs are efficient ways to send money, particularly when compared to methods like mailing a check or delivering funds in person.

How they're different: The same batched processing that keeps ACH transaction fees down can make ACH transactions slower than other types of EFTs. Wire transfers, for example, can be instantaneous, while ACH transactions often take one to three business days to complete.

Security

How they're similar: Both ACH transfers and other types of EFTs offer security advantages compared to non-electronic payment methods, because they eliminate the potential for a paper check to be lost in the mail or for a pile of cash to go missing.

How they're different: Because ACH transfers are processed through a central clearing house, they offer an additional layer of security in the transfer of funds that is not guaranteed by all types of EFTs. ACH processing times allow for either party to halt a transaction if necessary, and the ACH network encrypts account and routing numbers to protect the personal financial information of both merchants and consumers.

Some EFT methods, like wire transfers and credit cards, are more commonly involved in fraud cases because they are more difficult to reverse: the longer processing time of an ACH can allow business owners or financial institutions to stop a transaction during payment processing if fraud is suspected or an error is identified.

Transfer limits

How they're similar: Both ACH and other types of EFT are frequently subject to transfer limits, which can be calculated per day, per month, or per transaction. These limits are determined by the financial institutions involved in the transfer.

How they're different: ACH transfers often have lower per-transaction limits than wire transfers do, making them less appropriate for moving large sums. ATM transactions also frequently carry daily limits, and some credit card companies impose daily limits on spending in addition to capping the cardholder's balance at an established credit limit.

EFT vs. ACH FAQ

Is EFT faster than ACH?

Some types of EFTs are faster than ACH transfers. ACH transfers are processed in batches through a central clearing house, and can take one to three business days to arrive in a recipient's account. Wire transfers can be processed immediately and debit card, credit card, and ATM transactions are also typically completed in less than 24 hours.

How long does an EFT take?

EFTs typically take between one to three business days to complete, depending on the type of transfer. Wire transfers, debit card transactions, and ATM withdrawals all take approximately one business day, while ACH transfers can take up to three business days to process.

Is an EFT the same as a bank transfer?

Bank transfers—also known as wire transfers—are a specific type of EFT in which funds are moved directly from one account to another, without collection or processing, through a central clearing house or third-party payment processor. Bank transfers tend to have a higher per-transaction cost than ACH transactions (another type of EFT) and are typically processed within 24 hours.