BANKING

What is a wire transfer?

DEFINITION

Wire Transfer is an electronic method for moving funds.

The Key Takeaways

  • Wire transfers are a method of electronically moving money between banks in the U.S. and abroad.
  • Fees for wire transfers range between $15 and 50 dollars.
  • Wire transfers are usually completed the same day, or within a couple of days. The funds will be available to the recipient as soon as the funds arrive on their account.
  • It is important to verify the destination of a wire transfer, as it can be difficult to reverse.

 

What is a wire transfer? Definition and examples

Wire transfers are a method of electronically moving money between banks. Traditional money wires are sent from one bank using a network like the Society for Worldwide Interbank Financial Telecommunications (SWIFT) and Fedwire.

A wire transfer is a good option if you want to send or receive funds quickly. Wire transfers can be fast, reliable and safe.

Wire transfers are the only way to go for some large transactions. The funds are almost immediately available to the receiver. Your settlement agent, for instance, may ask you to use wire transfers to pay the down payment and closing cost when you buy a home. 1

Note:

Wire transfers can be any electronic money transfer. Most often, when someone requests a “bank-to-bank wire”, they are referring to a traditional domestic transfer.

International wire transfers are also available to U.S. citizens. These transfers are also called remittance transfer. Not only banks, but also credit unions and other financial service companies can be used as money transfer providers.

Alternate names: money wire, bank wire transfer

 

What is a wire transfer?

You’ll need to tell your bank how much you wish to send and where the money should go. Money can be transferred quickly once the bank has processed the transfer.

When you send a domestic wire, the funds often leave your account on the same day and arrive at its destination. The recipient bank does not have to wait to receive funds because you can only transfer money that is in your account. The money is available immediately to the recipient. International wire transfers can take up to a week, depending on where you are. 3

Sending money via wire transfer is a secure way to do so. Each party to a U.S. wire transfer must have a bank. Federal regulations require banks to verify your identity and ask for an address where you can easily be located.

The lack anonymity in banking makes it more difficult for thieves to perpetrate a fraud with a bank transfer. Personal checks and payment services such as PayPal are the most common scams.

What you need for a wire transfer

Contact your bank to initiate a wire. You will be asked for information on where you want the money sent. Often, this includes:

  • What bank account do you want to receive the money from?
  • Name of the recipient
  • The recipient’s bank account number
  • The recipient’s ZIP code and address
  • Name of the bank where money is sent
  • Bank ABA routing number5

To initiate a wire transfer, you may be required to complete and sign a document containing this information.

 

What is the cost of a wire transfer?

Bank wires are expensive, unlike some other electronic payments. The cost can range between $15 and $50 per transfer.

  • The bank
  • The wire can be either incoming or outgoing
  • The wire can be domestic or international
  • Transfer amount

The lowest end of the price range is domestic incoming wires. The most expensive wires are international outgoing ones. Certain account types may be exempt from domestic wire transfer charges.

Note:

Some banks limit the amount that you can transfer in a day or a single transaction. The limit is usually high. Some banks permit wire transfers up to $100,000 per client per day.

 

The pros and cons of wire transfers

Pros

  • Quick Process
  • As soon as the transfer is completed, funds are available.
  • Checks are not as reliable as they used to be

You can also find out more about Cons

  • It is difficult to verify the recipient
  • Beware of Mortgage Wire Scams
  • Once in motion, it is difficult to stop.

Pros Explained

  • Quick Process It takes only a few moments to initiate and set up a wire transfer. Transfers within the U.S. can be processed the same day depending on when you make your request. International transfers can take up to two extra days.
  • As soon as the transfer is completed, funds are available It is not necessary to wait for the funds to clear several days before the recipient can claim or use their money. There is no need to wait for the funds to clear before claiming or using them. Bank hold Placed on money received by wire transfer. 8
  • Money wires are more reliable than checks. A money wire is less likely to be fraudulent than a check, because the sender of the wire must have enough funds in his or her account.

Note:

Even if the money was at the bank, it may take a few hours for them to post the wire proceeds on the recipient’s bank account. To complete the transfer, a bank employee will need to perform a few tasks.

Cons explained

  • It’s hard to verify the recipient. If you send money to someone else or use an establishment that gives cash out (such as Western Union or a “money transfer” retail shop), it is harder to confirm who received the money. Cash can be collected by someone with a fake identification, and tracking the recipient may be difficult.
  • Beware mortgage wire scams. Hackers can target down payments, closing costs and other wires sent to a title firm. Verify by phone the intended destination of money, especially when you receive wire instructions via email.
  • It’s difficult to cancel a transfer Money transfer companies make it hard for senders to get their money back once they have sent it. In certain circumstances, international transfers can be reversed. 10

 

Alternatives to wire transfers

The term “wire transfers” is used to describe a variety of electronic transfers. Most payments are now electronic (even check-outs).

You can use these transfers if you cannot or do not want to send a bank wire transfer. Some are not as safe or instant as wire transfers.

Money Transfer Services

Independent financial services companies , such as Western Union, operate. Cash can be used for in-person transfers. This type of transfer can take anywhere from a few seconds to a couple of days.

The business will pay the recipient in cash. The recipient’s personal information, such as their name and home address, is used to identify them.

ACH Transfers

These transfers are made through the Automated Clearing House network. ACH transfer takes one to two business days. 11 In some circumstances, these transfers can be reversed. 14

P2P Payment Tools

P2P services are easy to use and often inexpensive. These include PayPal Venmo Zelle Popmoney. Each tool has a different transfer time frame. Popmoney allows three-day transfers from bank accounts. 14

Both have their own strengths and weaknesses. It may be different depending on if you’re making a payment, an exchange of money, or another type transfer.

 

FAQs (Frequently Asked Questions)

How can you make a wire transfer on the internet?

Most banks will allow you to send wire transfers via your online account. You may need to create an online account and sign up for online wire services. For more information, check out your bank’s web-based banking services.

What is the difference between a bank transfer and a wire transfer?

Although the terms are often used interchangeably by some, wire transfers and bank transfers are not the same. A bank transfer can also be called an ACH, or Automated Clearing House transfer. Bank transfers are slower than wire transfers. Bank transfers are good for direct deposit and payments to vendors.

When do wire transfers take place?

Banks have different processing times. You can check with your bank to find out the cutoff time and when funds are available for the recipient.

the authorAaron Krause

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