Things You Need To Know About Wire Transfers

Wire Transfer

The term “wire transfer” might bring to mind telegrams or old-fashioned correspondence, but it still has a place in the modern world of banking. Certain circumstances may require you to send money to a friend or loved one quickly – sickness, unexpected expenses, emergencies, etc. And a wire transfer, or bank transfer, can often be the fastest and safest way to get it there. In other cases, you might be required to submit a wire payment – maybe for a down payment on a home or other large purchase, for example.

In any case, we’re here to solve the mysteries surrounding wire transfers. We’ll outline how to use them in the smartest way, plus everything you need to know about how they work and how to send money safely when using wire transfers. Read on.

What Is A Wire Transfer?

In its simplest terms, a wire payment is simply an electronic transfer of funds, usually from one bank to another across a network administered by banks or money transfer services around the world. You might see this process also referred to as a “bank transfer,” “bank wire” or “remittance,” especially if it’s an international transfer. Bank transfers come in two different types: outgoing wire transfers, which let you send money, and incoming wire transfers, which allow you to receive money. You can also make a money transfer in cash at a cash-specific office.

A traditional wire transfer connects from one bank to another by a network such as the Federal Reserve Wire Network or the Society for Worldwide Interbank Financial Telecommunication. And if you’re the recipient of funds, a wire transfer is generally safer than accepting currency by check, which can take a long time to travel to you – and even longer to indicate that the check was bad or bounced. In addition, a wire transfer can be much more reliable for the recipient because a bank generally won’t initiate a wire transfer unless it can guarantee that the sender has the funds available in his/her account.

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Why Are They Called “Wire” Transfers?

This is a question best answered by history. When wire transfers began, they were completed over Western Union’s telegraph wires. With the changes in technology, wire transfers have become fast and easy digital options for sharing funds with friends, loved ones, and business associates. But they’ve retained the more nostalgic name. The important thing to remember is that with a wire transfer, no physical money actually ever changes hands. Instead, banks within a transfer network share information about the amount transferred, the recipient’s banking information, and the sender’s information.

The Top 10 Things You Need To Know About Wire Transfers

One: How Wire Transfers Work

To complete a wire transfer, the sending bank sends payment instructions to the recipient’s bank through a secure system such as Fedwire or SWIFT. At this point, the sender of the money pays for the transaction upfront at her financial institution. Once the recipient’s bank receives all appropriate information from the initiating bank, it deposits its own reserve funds into the correct consumer’s checking or savings account. The two banks then settle any appropriate payments after the money has been deposited. This is why no physical money transfer is made during a wire transfer.

Two: Information You Need To Complete A Wire Transfer

Before beginning the wire transfer process, make sure you have access to the following information:

  • Your name and contact information
  • The specific amount of money you’d like to transfer
  • The account number and routing number of the account you’d like the funds to come from
  • Your recipient’s name and contact information
  • The account number and routing number for the recipient’s bank account
  • In some cases, you’ll also need your photo I.D., so make sure it’s handy as well

And if you’re receiving the wire transfer, you’ll need to provide your account number and routing number to the person initiating the transfer on your behalf, so make sure you have easy access to those.

One important thing to keep in mind is that if you’re attempting an international wire transfer, you may need even more information. For example, some banks may require a Society for Worldwide Interbank Financial Telecommunication code, or an International Bank Account Number in order to identify international bank accounts, so you may need to request those from the recipient bank.

Some banks impose limits on the overall amounts of wire transfers, so make sure you’re clear on any restrictions that your financial institution may have in place.

Three: The Steps To Complete A Wire Transfer

Wire Transfer

Completing a wire transfer is fairly quick and easy. Using the information you’ve collected above, you’ll first complete either a paper or online form that relays that information. More and more banks are equipped to accept at least small wire transfers online, but if you’re wanting to transfer a large amount, you may need to visit a bank in person to get the process started.

Once your bank has all the appropriate information, it can usually take things from there. If you’re in a particularly urgent situation, especially if it’s international, you may want to call the banks involved to stress the urgency and make sure they keep the transfer moving. And make sure to hang on to your receipt in order to appropriately document the transfer.

It’s important to remember that once you’ve authorized your bank to transfer the funds you’ve specified, you can’t get it back. There’s no “stop-payment” option involved in a wire transfer. Make sure you know exactly who the recipient is on the other end of the transfer before you authorize it in the first place.

Note that if you’re the recipient of a wire transfer, you’ll need to provide the appropriate information about the receiving bank to the person completing the transfer. You might want to reach out to your bank for incoming wire instructions to make sure you’re providing exactly the right numbers so that your transfer comes through smoothly and quickly.

Four: How Long A Wire Transfer Takes

While a wire transfer remains one of the fastest ways to share funds, it’s not instant. A transfer can go through as quickly as within a few hours, or it could take up to a few business days to complete, depending on the circumstances. For example, domestic wire transfers typically go through much more quickly than international remittances. And transfers submitted earlier in the day are more likely to go through on the same day than those made in late afternoon. 

Bank employees have to complete several steps to make sure the transaction is accurately recorded by both banks. And everything from bank holidays to delays at intermediary banks can delay a transfer, especially if it’s international. The funds must be transferred from bank to bank – and once they reach the recipient’s bank, they then must be credited to the correct person’s account. 

When a bank has a large influx of transfers, it may take some time to make sure the correct accounts are credited appropriately. But once funds are credited to the recipient’s account, they are generally usable immediately. So the recipient does not have to wait for the transaction

to clear in order to access those funds. Banks typically do not place any kind of hold on funds received by wire transfer.

Keep in mind that most legitimate wire transfers should be complete within two to three business days, even if they’re international transfers. If your transfer is taking longer than this to clear, you should be suspicious. 

Five: Fees Associated With Wire Transfers

Wire transfers are quick and easy, which logically means they come with a cost, and these costs can be higher than for other electronic means of sharing money. Bank fees associated with wire transfers can range anywhere from $15 to $50. The level of fee is usually determined by the following:

  • Whether you set up the transfer online or at a branch location
  • Whether the transfer is incoming or outgoing – there is usually a fee at each end. Fees hover around $40 to send a wire transfer and around $10 to receive one.
  • How much your transfer provider charges
  • Whether the transfer is domestic or international – With international transfers, you may also pay taxes and an exchange rate, in addition to whatever fee your bank may charge for the wire transfer itself.
  • Whether the funds are U.S. dollars or foreign currency

Make note that if you’re wanting to use a credit card to facilitate your wire transfer, you may be required to pay an extra fee, plus interest. Most experts will advise using your checking or savings account for a wire transfer – for exactly this reason. 

And if you choose a different method of transferring money, those fees are usually calculated based on the amount to be transferred, the transfer destination and whether your wire transfer request is made in person or online. Western Union, for example, determines its transfer fee by payment method, loyalty program, and device by which the request is placed. Its current rates for a wire transfer of $1,000 run between $5 and $100, depending on the variables listed above.

Six: How To Keep Your Money Safe When Using A Wire Transfer

Wire transfers are generally safer than some other alternatives for sending money – sending cash through the mail, for example. But – they are generally impossible to reverse, so make sure you understand the full identity of whom you’re sharing funds with and you know for sure it’s going to the intended account. Whether you use a traditional bank wire transfer or another electronic means, you should receive confirmation and tracking information. You can use this information to monitor the transfer’s progress and keep your recipient in the loop. As long as you know exactly to whom you’re sending the money and you’re working with two reputable financial institutions, you should feel relatively safe.

The great thing about wire transfers is that both parties involved must have a bank account. And in order to set up a bank account, you must submit various items of paperwork that identify who you are, as mandated by federal regulations. With no anonymity allowed, that means it’s more difficult for thieves to set up scams, even using false identities. But that doesn’t mean wire transfers are 100 percent safe. You also need to do your due diligence to make sure the recipient is really the person you intend. Hackers, for example, can alter email details from people with whom you’ve been corresponding and doing business for some time. If you receive wire instructions via email, make sure to call the recipient and verify that all the details, account numbers, etc., match what the recipient intends.

Scams using wire transfers aren’t unheard-of – if a thief can take control of someone else’s bank account for even a short time, they can access funds not intended for them. The risk is that you send funds, the thief either forwards it somewhere else or withdraws the cash, and you know nothing about the scam until it’s too late to stop the transfer or recover your money.

You’re likely safer by using a bank wire transfer than some other options that allow the end-user to pick up cash – in those cases, anyone with a fake ID can pick up the cash you transmitted, and you’d have no level of recourse.

Seven: Federal And International Safeguards

Federal regulations do exist to help protect consumers involved in international wire transfers. The Consumer Financial Protection Bureau, for example, requires companies to disclose their exchange rate, when the currency will be available and any applicable fee. In addition, most of the time the sender has up to 30 minutes to cancel an international wire transfer if something doesn’t seem right about it, and authorities are required to investigate.

Some individual banks also take additional safeguards to protect the integrity of their wire transfers. Bank of America, for example, offers a SafePass feature that can help protect consumers against identity theft. When initiating a wire transfer, customers simply input a six-digit code that has been assigned to them by the bank, either via their mobile device or on a printed card if they’re making a transfer in person.

In addition, international wire payments are carefully monitored by the Office of Foreign Assets Control to make sure funds aren’t being wired to terrorist groups or for money-laundering purposes – and to confirm that funds are not going to countries that are under sanctions by the U.S. government. If any of these activities are suspected, the sending financial institution is authorized to freeze funds and prevent the wire transfer from being completed.

Eight: When To Avoid A Wire Transfer

Basically, you should avoid a wire transfer anytime you aren’t 100 percent positive who’s receiving the money on the other end. In particular, you should never initiate a wire transfer based on something you received via email. If you get an email request for funds – even if it’s from someone you know – make sure to call them first and verify that they need the money transferred to them. It’s very easy for scammers to send you a fake wire transfer request with routing and account information that doesn’t connect to the friend or loved one you’re trying to help.

In addition, you’re wise to question any request to wire money to an unrecognized bank or other financial institution. You always want to work with reputable banks or cash offices. If something feels “off” about the request, you should trust your instincts and try to find out more information before you initiate a wire transfer.

So if you’re suspicious about the trip you just won that requires an immediate deposit be wired, or if a long-lost friend suddenly surfaces on Facebook with an urgent request for funds, you might be wise to check out the situation further before simply sending money. Once it’s gone, it’s usually gone. Ask some questions and try to get someone on the phone to discuss. The same is true if you’re buying a home and you get a request to wire over a deposit – touch base with someone you know at your mortgage company to make sure the request is legitimate.

These precautions are especially important when wiring large sums of money. Sometimes, for example, title companies require wire transfers for down payments on homes. If that’s the case in your situation, make sure you speak directly with someone at the title company to verify the routing and account information and to verify that the transfer comes through as intended.

Nine: Types Of Transfers That Should Raise A Red Flag

There are a few categories of wire transfer that can raise red flags with government officials and could signal wrongdoing on the part of either the sender or receiver of funds. They include the following:

  • Incoming and outgoing wire transfers of the same amount
  • Transfers to non-account holders
  • Large cash amounts wired by businesses
  • Wire transfers to safe-haven countries
  • Regular transfers for no viable reason

Nine: Alternative Options For Safely And Quickly Transmitting Funds

The term “wire transfer” is often used to cover a wide array of electronic deposit options. Wire transfers aren’t the only way to safely and quickly share money – we’ve outlined a few other choices below.

  • ACH Transfer: The Automated Clearing House network allows banks to process paper checks and some electronic transfers. ACH transfers will be slower than a wire transfer, but it’s easier to stop or reverse in cases of fraud, and generally also come with lower fees. Because banks process large numbers of ACH transfers on any given day, they often batch them and send them through at various intervals during the workday, which may slow down your transfer.
  • Nonbank Transfer: If you feel uncomfortable using your bank account – or you don’t have a bank account – you can also use a nonbank partner like Western Union or MoneyGram to wire funds. You can generally set up a transfer like this online, or over the phone, or in person if you’d prefer. Some partners even have mobile apps that will allow you to arrange the transfer of funds. Nonbank transfers may charge higher transfer fees than wire transfers, but they’re convenient and an additional option if your bank isn’t a viable choice.
  • Peer-to-Peer Transfer:  This kind of transfer allows you to send funds directly from your bank account to someone else’s, based on his/her email address. These kinds of transfers are easy, fast, and convenient, but they do carry some concerns about data security and privacy. Examples of P2P apps include Venmo, PayPal, Square Cash, and many more. Each particular provider has its own strengths and weaknesses, so just make sure to do some research and ask some smart questions of each particular vendor to find out what measures they take to protect your data security and privacy.
  • Cashier’s Check – A cashier’s check is considered a wise option, especially if you need funds to clear quickly. They are considered as safe as wire transfers and are usually less expensive to get. They only work for you, though, if you don’t have to quickly share money with someone who isn’t geographically close to you. In that case, you also have to factor in mailing time.
  • Joint Bank Account – If you find yourself repeatedly sending money to a friend or loved one – a dependent child, for example – the easiest option may be to simply open a joint bank account so that you both can access it. And you can move funds from other accounts into this one with no extra transfer fees and with a great deal of convenience.

Overall, a wire transfer can be a convenient way to transfer money quickly and safely, especially in emergency situations when the need for funds can be urgent. But you’re not locked into that choice – if a wire transfer makes you uncomfortable, you also have a few other options that will allow you to share money when needed.