The Basics Of Wire Transfer
Need to transfer funds urgently to your relatives abroad? Or have you had to make payment for your dream house before anyone else? No worries. Wire transfers have got you covered. But actually, what does wire transfer mean?
Without wasting any more time, let’s find out about wire transfer.
What is Wire Transfer in Banking?
A wire transfer means transferring money electronically from one person to another through a network of banks or financial institutions spread across the world. The transfer can be domestic or international and involves the transfer of no physical currency. Instead, information is passed between banking institutions about the recipient, the bank receiving account number, and the amount transferred.
With the help of wire transfer, people in different locations can safely transfer money to locales and financial institutions around the globe. It also makes sending funds worldwide easier and convenient for businesses that work on a global scale.
The Office of Foreign Assets Control monitors the international wire payments to make sure the money isn’t being wired to terrorist groups or for money laundering purposes.
There are two main types of wire transfers, and the cost and delivery time vary for each transfer.
Domestic Wire Transfer
You can initiate domestic wire transfers either in person at your bank’s local branch or through your online bank account. A domestic wire transfer consists of instructions about the recipient of the money, including:
- Recipient’s full name
- Account number
- Contact information
- Transfer amount
- Other bank account details
International Wire Transfer
If you’re sending money overseas through your bank, you’ll generally use an international wire transfer. They may need additional information and also take longer to complete than domestic transfers. These are ideal for businesses operating internationally.
How Does it Work?
For wire transfer, senders first pay for the transaction at the remitting bank and provide the recipient’s name, bank account number, and the amount transferred. The sending bank then forwards a message to the recipient’s bank with payment instructions through a secure system. The recipient’s bank receives all the necessary information from the initiating bank and deposits its own reserve money into the correct account. The two banking institutions then settle the payment on the back end (after the money has already been deposited). After a transfer is complete, the funds are usually available to the recipient for immediate use or withdrawal.
Non-bank wire transfers do not require bank account numbers. One famous non-bank wire transfer company is Western Union, whose international money transfer service is available in more than 200 countries.
In wire transfer, the funds are irrevocable in most cases. So, it’s essential to confirm details such as the recipient’s bank account number and contact information when completing a wire transfer. But for some reason, if you make a mistake and notice an error after a transfer is initiated, like you have put in an incorrect dollar amount or wrong bank account number, immediately contact your bank, credit union, or wire transfer. It will help you know if they can still help you make an adjustment or process a cancellation. In most cases, a wire transfer can only be stopped or paused for corrections if a cancellation notice is received before the transfer is complete.
How Many Days Wire Transfer Takes?
In a wire transfer, the funds pass through a processing system, and then the payment is cleared. Wire transfers take anywhere from about 1-5 days to process. If an electronic form of payment takes longer than a few days, it cannot truly be considered a wire transfer. A domestic wire transfer is processed within 24 hours of initiating the transfer. International wire transfers are typically delivered within 1-5 business days. The transfer time may also vary depending on designated federal regulations, cut-off times, weekends, and bank holidays.
A domestic wire transfer takes less time because it only has to go through a domestic Automated Clearing Houses (ACH). In contrast, the international wire transfer must go through a domestic equivalent of ACH and a real-time wire processing system. It has to clear an additional processing system, so it takes an extra day to process the transfer.
If you notice any delays in your transfer both as a sender or a recipient, you can reach out to the bank or transfer service to know about any updates on processing time.
How Much Does Wire Transfer Cost?
A wire transfer can be considered one of the more expensive ways to send money. It costs money to initiate wire transfers, regardless of whether they are domestic or international transfers. Some providers of domestic wire transfers charge around $25 per transaction, but the fee can be as high as $35 or more. International wire transfers sometimes have a higher cost—as much as $45. Recipients might also have to pay their bank to receive the money.
Is it Safe to Use Wire Transfer?
Wire transfers are considered safe and secure as long as you are not sending money to an unknown person. A legitimate wire transfer service provider will check the identity of each party involved in a wire transfer transaction so that anonymous transfers are near impossible. Remember that a wire transfer, once initiated and the money is transferred, cannot be canceled. So, always double-check that you are sending money to the right person.
Today many fraudsters have made it their job to scam people. They might say that you have won a lottery and then go on to ask you to wire money to pay supposed fees. If you fall for such tricks, you may end up losing your hard-earned money. To avoid falling victim to such traps, never provide your account details to unfamiliar or suspicious people.
You can use several methods for wiring money. Though a wire transfer is one of the expensive ways of transferring funds, it can be a lifesaver when you have to transfer funds internationally, that too when speed is crucial. Don’t forget to decide beforehand which type of wire transfer will work best for your financial needs or situation.