Types of Bank Transfers

The modern banking industry is largely a system of debits and credits rather a system of exchanging tangible currency. The shift from reliance on currency to intangible assets has allowed the banking industry to streamline payment methods between parties using a variety of electronic means for payments to exchange hands without the need for checks or currency being drawn from an account.

ACH transfers—an acronym that can mean Automatic Clearinghouse or Automatic Check Handling for the same system—are a system of electronic checks used to trade small amounts of money between parties. The Worldwide Automatic Transaction Clearing House clears and manages ACH transfers, as the agency tracks debits and credits between banks. ACH transfers usually take three or four days to clear.

Although we typically use the term “wire transfer” when talking about transferring money from one bank to another, bank wire transfers are typically only used to transfer large sums of money between banks. The Federal Reserve Wire Network brokers the transactions instead of WATCH, and transfers are processed in the same day in most cases.

Transferring money across international lines takes a different set of protocols for domestic wire transfers. SWIFT wire transfers are available to trade money across borders, and are used to transfer quickly funds without check fees between banks in larger nations. BIC and IBAN provides a similar service, and covers an overlapping, but not identical, set of countries as SWIFT.

Commercial money transfer services operate largely outside the banking systems. Using stores of their own assets to back transfers between points, they reimburse agents and transfer locations using funds managed completely within their own systems.