US Banking Terms Glossary: ​​What is ACH, ABA, EFT, Wire and more (2023)

Opening a bank account and learning about different types of money transactions can be a lot without all the acronyms involved.

In this guide, you'll find all the definitions you're looking for and a complete breakdown of the most important payment and routing number types you need to know.

We'll also cover Wise as an alternative option for sending money internationally and apply all the knowledge you've gained in this article.

So let's start.

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Overview

All of these acronyms can be a bit tricky, so let's break them down a bit:

What types of routing and payment numbers are available in the United States?

There are many different banks in the US, but they are all connected through a system of numbers called "routing numbers."

route numbersthey're a bit like postal codes, but for banks. With these numbers, there are several different ways to make payments between banks.

Here are some terms related to transferring money; you will find them all discussed below.

• Electronic Funds Transfer
• electronic checks
• paper checks
• CCA
• Cable
• Direct / bank debits

Different types of payments may require different banksroute numbers, and just like if you enter the wrong zip code in a letter, your transfer could even fail if you use the wrong code.

However, remember that the numbers discussed in this article refer to your bank, not to you personally. Like 5-digit ZIP codes, these 9-digit routing numbers are not unique to you.

In order to receive a payment, you will need to provide more information, such as a routing number that can identify you as an individual.

What is an EFT payment?

stands for EFTElectronic Funds Transfer, and refers to any payment from one bank account to another that is made electronically.

EFT is too broad a term; the conclusion is simply that notes and coins are not exchanged. In the US, these transfers are sometimes called electronic checks or electronic checks; is the same.

The benefits of EFT payments are like the benefits of technology in general: paying electronically simplifies the process for you and reduces administrative costs.

How do EFT payments work?

There are many different types of EFT payments, so you'll find them in many different contexts, from grocery shopping to cashing your paycheck. What they all have in common is that they start with the payer requesting and authorizing the payment.

Once the bank details are submitted, the payer has the money withdrawn from their account. This money is credited to the receiving bank, which pays the beneficiary. So bank balances change, but they are communicated electronically and there is no physical movement of money.

Send money to or from the US with Wise

If all you want is a fast, secure, and low-cost international money transfer,IntelligentI can help.

Sending money through your bank, or through a regular money transfer service, means you could be forced to pay more due to low exchange rates, not to mention expensive flat fees.

Some US banks do not offer online transfers, which means you have to make a special trip to your local branch to figure this out. If you are abroad, this can be prohibitive.

Wise does everything online and usesthe mid-market exchange rate- just like what you'll find on Google - and only charges a low, transparent fee.

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What is an ACH payment?

ACH transfers are a type of electronic transfer (EFT) that includes direct debits and direct deposits:

• With ACH direct debit, authorize another person or organization to withdraw money from your bank account on a regular basis.

• With an ACH direct deposit, someone else can pay you.

Unlike wire transfers, which we'll get to later, banks process ACH payments in bulk. This can make them relatively slow, but also quite cheap. So if you're not in a rush, an ACH payment might be a good option.

Can I send an ACH internationally?

To transfer money internationally with a bank, you will generally need to make an electronic transfer, as banks predominantly offer ACH for payments within the US only.

However, yarn can sometimes be difficult to make and can be quite expensive. There is more information on bank transfers below, and also on non-bank alternatives like Wise.

Intelligentuses a different approach to international payments compared to banks, which may be cheaper for you.

Its technology connects local bank accounts around the world for customers in the United States to send money to Wise's US bank account, and Wise then pays from its networked account in the destination country in the required currency.

This reduces expensive international transfer fees and makes payments faster. It also allows them to accept ACH payments for their international transfers.

What is ABA?

Another acronym you may have come across is ABA, which stands forAmerican Bankers Association. It is the trade body that represents banks and all types of financial service providers, such as trusts and community savings associations.

The ABA is involved in many things related to the banking industry, including creating best practices, lobbying, and most of all, managing ABA routing numbers.

What are ABA routing numbers?

ABA numbersare codes assigned to banks by the American Bankers Association. Each bank in the US has its own ABA number, which is why they are sometimes simply called bank routing numbers.

Large banks may use multiple ABA routing numbers; what you need will depend on exactly where you are.

ABA numbers may change if your bank is acquired by another bank. If that happens, you'll need to make sure that everyone you pay regularly, and everyone who pays you, has the new number. You will also need a new checkbook.

What is the difference between an ACH and ABA routing number?

Don't fall for the common trap: banks sometimes require you to use different routing numbers for different types of transfers. It varies from bank to bank, but they may have different numbers for paper transfers, wire transfers, and wire transfers.

All routing numbers are ABA numbers, but you can also have what is commonly called an ACH number.It is actually an ABA number that is used for ACH transfers only.

Check with your bank if you can use the same number for all types of transfers or if you need different ones. You can easily find out by asking at a branch, using your bank's online FAQ, or by going to your online bank and starting a customer service chat.

What is a paycheck?

A check is a written instruction directing the transfer of a certain amount of money from one bank account to another.

Checks used to be very common, but today they are less popular due to the rise of electronic payment methods.

If you receive a check, take it to your bank and you can pay it into your account (sometimes called "cashing a check") with the help of a bank teller.

There's a chance you can withdraw at an ATM, but that's a bit trickier.

If it is your first time, it is best to go to your bank in person, or through the drive-thru if they offer it, to deposit the money from the check in your bank account.

What are routing numbers used for on checks?

The 9-digit routing number on your checks is an ABA routing number.

You can usually use this for paper transfers, electronic checks, or deductions, and possibly, not necessarily, other types of transfers.

If you need a routing number for an ACH transfer, or especially a wire transfer, check with your bank first.

What is a bank transfer?

Wire transfers, these days, are electronic funds transfers. However, they got their name when they first appeared, and the instructions were literally transmitted over a wire, through the telegraph system.

Wire transfers are generally faster compared to the ACH payments we looked at earlier. These are processed one by one rather than in batches, though you'll need to check your bank's cutoff times as missing them could set your money back.

Wire transfers are generally more expensive than ACH, so they are most commonly used when sending a large amount of money, sending an international payment, or sending money in a hurry.

How does a national bank transfer work?

Domestic wire transfers are a traditional way to transfer your money from one bank to another, but banks often charge a hefty amount for the service.

And sometimes they can be inconvenient, as some US banks don't yet offer online wire transfers.

After you request a wire transfer, your bank will connect with the destination bank and transfer the funds, generally much faster than an ACH transfer, as long as you meet your bank's cut-off times.

How does an international bank transfer work?

The principle ofinternational bank transfersit is exactly the same as for domestic ones, but the process is much more complicated and often involves intermediary banks connecting the sender with the recipient.

The basic process is that your money travels from your bank to the recipient's bank, through 1 to 3 intermediary banks, through theRed SWIFT.

This is reliable, but it can be slow, and theintermediary banksYou can also deduct a fee as you process payments, meaning the recipient ultimately gets less than expected.

If you are receiving an international bank transfer, you may need to provide a SWIFT code instead of a routing number. Check with your bank about what they use, or you canbuy online.

Is there a wiring route number?

If you are receiving a domestic wire transfer within the US, you may need to provide the payer with a different routing number than the one on your checkbook.

The cable routing number, technically still an ABA routing number, is a 9-digit code like the ones already discussed.

You will need to check directly with your bank which number to provide; It may be the same as the ACH number and/or routing number on your checkbook, but it may not be.

If you receive a wire transfer from another country, you may not need a routing number. Instead, you may need to give them the address of your bank.Swift Code, which you can find out through them orbuy online.

Regardless of how you choose to send your money, good luck navigating the complex world of ETFs and routing numbers, and don't let banks get in the way of your transfer.