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Sending 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 differences between direct deposits and wire 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.
The advantages of wire transfers and direct deposits
A summary of the advantages of wire transfers and direct deposits.
Advantages to wire transfers
Speed
Reliability
Useful for currency exchanges
Advantages to direct deposits
Convenient
Low cost
Good for regular payments
Disadvantages of wire transfers and direct deposits
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.
Wire transfers are the best option for international 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.
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 organizing this. However, if you are looking to send money quickly as a one-off payment, a wire transfer may be worth considering.
FAQs
Can you send direct debits and wire transfers via a mobile app?
Can I send direct deposits and wire transfers with money transfer companies?
Are direct debits and wire transfers the best ways of sending money internationally?
How can you save money when sending wire transfers?
What recipient details should you gather before sending a wire transfer?
Best option for international transfers
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.
