If you’re looking to send money from one bank account to another, you may have come across two popular sending methods: wire transfers and direct deposits. Wire transfers are an electronic means of transferring money to another bank account internationally or domestically and are available with banks worldwide.
Direct deposits are most commonly used to send regular payments domestically, for example, to distribute salaries. Find out the critical differences between the two to avoid getting caught out.
Yasmin Purnell Fact Checker Elliot Laybourne May 3rd, 2024 Disclosure On this page The main differences between direct deposits and wire transfers The advantages of wire transfers and direct deposits Disadvantages of wire transfers and direct deposits Direct deposit vs wire transfer: Which is better? Best option for international transfers Related contentSending money through banks is an accessible method that many people use today. However, there are different forms of payment, which can get confusing for some banking customers. In this guide, we outline the differences between a wire transfer and a direct deposit.
However, these are not the only methods of sending money. You can also use balance transfers from top money transfer providers like TorFX, Instarem, Key Currency, Currencies Direct, WorldRemit, Wise, XE, and Currencyfair. The advantages include faster processing time, lower fees, and having to enter fewer details. In many cases, the recipient can instantly receive money from balance transfers.
The main difference between a wire transfer and a direct deposit is that a wire transfer is faster than sending money to an account, but a direct deposit is cheaper.
A wire transfer is an electronic transfer from one bank account to another, whether transferring money internationally to family, employees, paying for goods, or simply transferring money within your own country. Wire transfers will typically be instant, although international wire transfers may take a couple of working days. Read our guide on how long wire transfers taketo learn more.
Similarly, a direct deposit uses an electronic network to deposit money from one account to another. The network used for direct deposits is called the Automated Clearing House (ACH), and funds are credited automatically on the agreed date. Direct deposits will most commonly be used by businesses to issue paychecks and tax refunds.
A summary of the advantages of wire transfers and direct deposits.
Wire transfers are deposited almost immediately into the account money is being sent to, although this may be delayed a couple of working days for international transfers.
In cases of emergency or where you need to get money to another account urgently, wire transfers are a reliable way of getting money to another account quickly.
If you need to send a transfer in a currency that is not your local currency, wire transfers can be used to do this.
Direct deposits are a convenient, hands-off way to send and receive regular payments.
Direct deposits tend to be free to organize.
If you need to send or receive a recurring payment, such as your wages from an employer, direct deposits are a good way of arranging this.
While wire transfers are a quick way of depositing money in a bank account, they can also be expensive. This could put you off using wire transfers altogether. They'll typically range from around $15 to $45 in the US, with the fees for international wire transfers increasing compared to domestic transfers, which are free for wire transfers.
If you're sending money abroad, a wire transfer will be the best method out of these two. However, you will likely find that a money transfer provider will give you lower fees than your bank.
Direct deposits are most commonly used for recurring payments within your own country. Two main reasons you may not want to use this transfer method are if you are looking to send money urgently (direct deposits may take a couple of days to gain access to the funds) or if you are trying to send money abroad in another currency. For example, you can only receive USD within the United States via the ACH network with a direct deposit, while GBP can only be received in the UK via Bacs.
The bottom line is that both of these methods for sending and receiving money have their advantages in their own right – but which is better really depends on why you’re looking to send money to another account.
If you’re an employer looking for a convenient way to make regular payments to employees, a direct deposit will be the most straightforward way of organizing this. However, if you are looking to send money quickly as a one-off payment, a wire transfer may be worth considering.
Most money transfer services and banks have mobile apps that provide the same functionality as you get on the official website through a browser. Therefore, you can send direct debits and wire transfers through a mobile app. You need to visit Google Play or the App Store and inspect the features list to examine what transfer types are supported.
Also, take a closer look at user review comments to take a look at the experience of others. You can get a feel for the quality of an app and if it is worth using. The overall app score should be at least 4.0 out of 5 to indicate good quality.
Specialist transfer providers offer multiple payment methods to transfer funds. Therefore, you can use those platforms to initiate wire transfers to send money. In some cases, you may need to enter the details of a traditional bank as the source of funds. In contrast, other services have the infrastructure to provide wire transfers from their bank accounts.
A lot of providers will let you send money by wire transfer, while direct deposits are less frequently offered.
Arguably, the best way of sending money is by using a balance transfer from specialist transfer providers. Services like Wise allow you to top up money to the digital balance, which can then be instantly sent with a low fee structure.
Also, balance transfers can be sent to most countries worldwide if they are in the global network of the money transfer company. Usually, fewer details are required for sending money with balance transfers. Often you can get away with just entering the recipient’s email.
Wire transfers have a high fixed cost of around $20-50 per transfer. Therefore, to save money, you should consider making one large transfer instead of several smaller ones. This means you will send the same amount of money yet only pay one fee. Also, you should compare the transfer fee between different banks and money transfer services to find the best deal.
To ensure that the wire transfer arrives in the correct recipient’s account without setbacks, you must enter the correct details. The details you need include the recipient name, bank name, bank address, account number, SWIFT code, routing number, and the amount you wish to send.
The specific details you enter will be clearly displayed in the user interface. Enter the details carefully since the wrong information can lead to a cancellation of wire transfers with a fee. Also, when you send money to the same recipient a 2nd time, the details may autofill, which is a convenient feature.
Wire transfers and direct deposits are valid methods of sending money internationally. However, to get better FX rates, lower fees and faster processing times without an extra charge, consider using specialist transfer providers. The competitive fee structures offer a much better deal that will save you a lot of money.
XE is an example of a top-tier specialist transfer company that offers some of the best currency conversion rates in the industry. Also, the rates are transparently displayed on the homepage for you to compare.