Wire Transfers: What They Are and How They Work
Wire transfers are just one of the many ways you can transfer money from your account into someone else’s. Although it may not be the cheapest and easiest way to transfer money, it is quite possibly the safest and fastest way to send money to any financial institution around the world. Both parties must provide the correct information and complete the necessary steps to initiate a successful wire transfer.
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How Does a Wire Transfer Work?
A wire transfer is a form of electronic funds transfer (EFT) — in which money is transferred directly from one person’s account to another through computer-based systems and software. Instances of every-day electronic funds transfers include:
- ATM transactions;
- Direct deposit;
- Online banking transfers;
- Debit card transactions;
- Electronic check conversion.
These methods of transferring money are among the safest, as many of them are covered under the Electronic Funds Transfer Act (EFTA). The EFTA shields you from liability should someone steal your information, and therefore money.
Where wire transfers differ from other EFTs is the speed in which you can send large amounts of money to far regions of the world. Wire transfers also often involve a third-party service to do this, which typically require a fee.
How to Do a Wire Transfer
Conducting a wire transfer will usually include three parties: the sender, a bank/money transfer service, and the receiver. Essentially, the sender will need to initiate a request with their bank or money transfer service, who will then transfer the money to the recipient. To send or receive a wire transfer, you will need to complete several steps.
How to Send a Wire Transfer
As the initiator of a wire transfer, you will need to provide certain information that the recipient does not. In addition to filing a request with your bank, you will need to provide information such as:
- The routing number of the receiving bank, which can be found at the bottom of a check if you have ever written one.
- The name, address, and phone number of the receiving bank.
- Receiving bank’s accounting number.
- Recipient’s name and address.
If all information is correct, the initiator may go ahead with the transfer. For international transfers, you will also need a SWIFT, BIC, or IBAN code. These codes are used by your bank to identify overseas financial institutions and keep track of the transfers made to them
How to Receive a Wire Transfer
You will need much of the same information to receive a wire transfer, as you will be providing the sender with routing and accounting numbers, your bank information, etc. Additionally, you will need this information to confirm the payment to your bank. You may also need to know the personal information of the sender. As the recipient, you will likely have to wait for the money to be transferred, as well as follow up with the bank to make sure everything is in order.
Domestic and International Wire Transfers
As they are made inside the country, domestic wire transfers are often cheaper and resolved more quickly than international transfers. Additionally, an international transfer may involve more parties which charge money for their services. However, the sender and recipient may choose to split these fees.
Timing of a wire transfer can vary depending on what a bank offers. For instance, if a bank provides online international wire transfers, this is as simple as inputting the information. A bank may only do in-person wire transfers, where one must request a wire transfer in-branch — which will take longer. For these international wire transfers, it may take a couple of business days.
Other factors that may affect both domestic and international wire transfer times are bank holidays, the currencies involved, the method in which you will pay, and fraud protection/regulation. Both methods of wire transfers are secure, as long as you haven’t fallen prey to a scam. It is vital to double check the details and to make sure you are sending your money to the correct person when initiating a wire transfer.
Money Transfer Services
There are many types of money transfer services, all which offer various features and fees. The most common wire transferring services are Western Union and TransferWise. Both services transfer money domestically and internationally though they can vary in speed, exchange rates, maximum transfer amount, and fees, all depending on where you send money to and from.
Wire Transfer Fees
Fees for wire transfers are not costly. However, you may want to understand where you can transfer your money for the lowest price. For Western Union, TransferWise, and various other banks, fees will go as follows:
- Western Union. Fees start at $5 and will increase by the amount of money transferred, and will also depend on whether your are transferring domestically or internationally.
- TransferWise. Will charge a $3 flat fee and may cost up to $300 depending on the amount transferred and whether it’s being transferred domestically or internationally.
- Banks. Banks may make domestic transfers for free. However, banks will charge anywhere from $0 to $30 for international and domestic wire transfers.
Alternative Types of Electronic Transfers
As mentioned above, there are several different types of electronic funds transfers. All have slightly different processes, transaction speeds, and fees attached. Other, more specific methods of electronic transfers include:
- ACH Transfer. ACH payments are pre-authorized debits that transfer money into or from your account. ACH payments act much the same way as depositing or writing a check.
- Cashier’s Check. For a cashier’s check, the bank uses its own funding to deposit. Cashier’s checks are usually used to transfer more substantial amounts of money, such as for real estate or car purchases.
- Money Order. Money orders are essentially a pre-paid check. Since the money has already been paid, the recipient doesn’t have to worry about a money order bouncing, making it a safe way to receive a payment.
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Desmond Rhodes is a writer out of the Northwest. A philosopher, gamer, and enjoys his Hunter S. Thompson.
This post was updated August 8, 2019. It was originally published August 9, 2019.