The Main Differences
The main difference between a wire transfer and a direct deposit is that a wire transfer is a faster way of 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 that’s transferring money internationally to family, employees, or 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 take to learn more.
A direct deposit, similarly, 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.
If you want to know more on how to wire money internationally, check our guide on ways of wiring money abroad.
What are 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 organise.
- If you need to send or receive a recurring payment, such as from an employer, direct deposits are a good way of arranging this.
What might put you off of using a wire transfer?
While wire transfers are a quick way of depositing money in a bank account, they can also be expensive. Wire transfers will 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. Our guide to wire transfer fees breaks this down more comprehensively as well as our guide on cheap wire transfers explains how to find the right provider with lowest fees.
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.
What might put you off of using a direct deposit?
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 is if you are looking to send money urgently (direct deposits may take a couple of days to gain access to the money) or if you are trying to send money abroad in another currency. For example, with a direct deposit, you can only receive USD within the United States via the ACH network, whilst GBP can only be received in the UK via BACS.
Direct deposit vs wire transfer: which is better?
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 organising this. However, if you are looking to send money quickly as a one-off payment, a wire transfer may be worth considering.
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Yasmin is the content writer for MoneyTransfers.com. With an English degree from the University of Nottingham and over 5 years’ experience freelancing in the personal finance niche, Yasmin joined the team with a mission to make international money transfers accessible and easy to understand for all. When she’s not writing, you’ll find Yasmin on her yoga mat or planning her next escape to the mountains.