Wire transfer vs. direct deposit: What’s the difference?

A woman seated at a desk uses her smartphone to research wire transfer vs direct deposit to understand the differences between the two.Image: A woman seated at a desk uses her smartphone to research wire transfer vs direct deposit to understand the differences between the two.

In a Nutshell

You can use wire transfers to quickly send or receive money from just about any bank account for a fee. Direct deposits, on the other hand, can take several days and are mostly used by organizations and businesses to send you money.
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Direct deposits and wire transfers are two common ways to digitally send and receive money, but they both have different uses.

If you’re looking to send a large amount of money, or send it quickly, a wire transfer can be a great option. If you’re on the receiving end, you can get the money almost instantaneously in some cases. On the other hand, you generally won’t be using direct deposits to send people money — it’s more a way that businesses and organizations can send money to individuals.

Read on for more about how wire transfers and direct deposits work, plus other options for sending and receiving money.

What is a wire transfer?

A wire transfer is one of the fastest ways you can send or receive money from virtually any bank account, either in the U.S. or abroad.

Wire transfers are especially popular when speed is necessary. They’re also great for large transfers like a house down payment because there’s no need to carry around (and risk losing) wads of cash.

But there are some risks. Wire transfer scams — where thieves try to trick you into wiring them money — are a reality. Another thing to keep in mind: Wire transfer fees can be expensive, costing around $30 for domestic wires and $50 for international wires. Some banks may even charge you a fee to receive a wire from someone, usually from $5 to $15.

How wire transfers work

To send a wire transfer, you’ll need the bank name, routing and account numbers from the person you’re sending it to (and vice versa: You’ll need to give your banking details to someone wanting to send you a wire transfer). You’ll submit these details along with how much you want to send to your bank in the form of a wire transfer request.

Your bank will take the money from your account and pass those details on to the recipient’s bank, which will then deposit that amount into their account. If the accounts are in different banking regions or countries, your bank may need to pass on the request to an outside network such as SWIFT or Fedwire. These networks act as a sort of third-party post office to make sure the funds get sent to the right bank.

What is a direct deposit?

Direct deposits, on the other hand, are a popular way for businesses and organizations to deposit money into your account. So they’re not for sending money to anyone — instead, it’s the way 93% of people receive their paychecks via direct deposit from their employers, according to the American Payroll Association.

Direct deposits are also considered to be a safe way to receive money. It’s generally free for organizations to send you money via direct deposit, which is why it’s so popular. The downside is that direct deposits can take a bit longer to process.

How direct deposits work

Unlike wire transfers, which are processed one by one, direct deposits use the Automated Clearing House (ACH) network, which batch-processes them. To set up direct deposits you’ll need to sign an ACH authorization form and give the sender your bank details — something you’ll usually do during the onboarding process with your employer.

When it comes time to pay you, your employer submits a direct deposit request to their bank, which batches them together and sends it to the ACH after the close of the business day. The ACH, in turn, unscrambles the requests and stacks them together into new batches to send out to each bank overnight.

Each bank then unpacks these requests and then credits accounts with the correct amounts.

What’s the difference between a wire transfer vs direct deposit?

Wire transfers and direct deposits are both methods for moving money around. Here’s a summary of their differences:

Wire transferDirect deposit
How you use itSend or receive money from anyoneReceive money from businesses and organizations
Typical cost$20–$30 to send domestic
$50 to send international
$0–$15 to receive
Processing timeSeveral minutes for simple domestic wires and up to a few business days for international1–3 business days
Where money can be sentDomestic or international bank accountsDomestic bank accounts

Wire transfer vs direct deposit: Which is better?

Wire transfers aren’t necessarily better than direct deposits, or vice versa. They both achieve the same goal of moving money around, but they’re used for different purposes.

If you need to send or receive money fast, especially for large amounts or international transfers, a wire transfer is your best bet. Just remember there’s a fee to pay. 

If you’re looking to get a check from your employer, the government or some other group and you don’t want to mess with paper checks, direct deposit is the way to go.

Next steps

If you need to send or receive money from your bank account without having to use cash or a paper check, a wire transfer or direct deposit aren’t your only options. Here are some other good ways to do online money transfers:

  • Zelle: Many bank accounts with online access come with this app, which lets you transfer small amounts of money between friends quickly for free.
  • PayPal: PayPal allows you to send and receive money internationally and is widely used for online shopping.
  • Venmo: Venmo works similarly to PayPal but includes social elements, such as the ability to send fun emojis and text messages with friends when you’re splitting a bill.
  • Cash App: Cash App offers nifty features like a DIY debit card and the ability to send and receive money from accounts in the United Kingdom for free.
  • Western Union: One of the original money transfer services, this company can be expensive but is popular for sending almost-instant payments abroad.

About the author: Lindsay VanSomeren is a freelance writer living in Kirkland, Washington. She has been a professional dogsled racer, a wildlife researcher, and a participant in the National Spelling Bee. She writes for websites such a… Read more.