Wire Transfers: Everything You Need to Know
Electronic money transfer or also known as wire transfer — you’ve probably heard about this from business transactions, and financial institutions. To put it simply, you are sending a specific amount from your own bank to the bank account of the recipient, be it for commercial or personal reasons. But what is the overall scheme of this transfer? This guide will help you understand everything there is to know about sending money through a wire transfer online.
First of all, let’s get to know its basic definition.
What is a wire transfer?
As mentioned above, it’s the digital way of moving your money from your account to someone else’s using a secure network. One of the widely used networks for international money transfer is the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Meanwhile, domestic transactions may go through networks such as the Federal Reserve Wire Network (Fedwire) or the Clearing House Interbank Payments System (CHIPS).
This bank-to-bank transfer shouldn’t be confused with other forms of money transfer which involves a third-party money transfer service. And it is note-worthy that no physical money or bank note is involved in this transaction. Instead, information is being transferred from each party involved.
How does a wire transfer work?
For this matter, the sender provides the information of the receiving account to their bank or credit union. The bank, in turn, processes the transaction and sends out the amount to the receiving bank account. If the receiving account is under a different banking institution, both banks settle the payments on the back end. This is where transfer costs are involved. Wire transfer fees vary from every institution and it also matters where the money is set to be received. Some banks charge outgoing wire transfers alone while others charge both incoming (receiving money) and outgoing bank transfers.
When wiring money internationally, you can expect to pay at least $45 per transaction, and for outgoing transfers, at least $15. On the other hand, if you wire transfer domestically, you can expect it to cost less. Incoming domestic wire transfer fees can be at least $15 and outgoing transfer can be at least $25.
As you can see, international wire transfer tends to cost more than domestic transfers. The main reason for this is that there are more parties involved in wiring money overseas as opposed to local transactions.
For example, you are sending money to a foreign country. Your funds will be accessed from a U.S. bank which then will be processed by a US-based wire processing system and received by another wire processing system from the country of the recipient before it is received by the foreign bank that handles the account of your recipient.
Domestic money transfer is much more straightforward because it only goes through one payment system.
Another factor for higher banking charges in international transfers is the rate of the foreign currency. Often times, banks charge a higher mark-up when converting currencies.
Here are some tips on how to wire transfer money internationally at a lower cost:
- Ask your initiating bank if they offer lower fees for foreign currencies. Some banks have lower charges if you convert your U.S. dollars to the local currency of your recipient before transferring the amount.
- Do your wire transfers in the same bank. Recurring wire transfers on accounts are sometimes charged less by financial institutions. However, you have to check with your bank institution if they actually have this policy.
- Do the wire transfer online yourself instead of asking a banker to do it for you, simply because banks will have to compensate bankers for setting up your transaction.
How to wire money?
There are several ways on how you can wire money. We’ll discuss each of the options, their advantages and disadvantages as well as their respective processes.
- Online Bank Transfer
This won’t require your presence for the transaction to push through. All you need to do is supply the needed information in the wire transfer section of your banking institution. This, however, means that you need to have an active online banking account so you can access your bank online.
You need to take note that every bank imposes transferable amount limitations per day. If the amount you are transferring exceeds this, you might need to call your bank to authorize the transaction. Otherwise, a physical bank transfer is what you need to do. Be prepared to pay additional fees for every online transaction you make.
- Bank Transfer in Person
The first thing you need to do is check with your bank if you can do international bank transfer, if you intend to send money overseas. You would need to provide your complete details to the bank staff that will assist you. This information includes your name, account number, the name and address of your recipient, their International Bank Account Number (IBAN), and their BIC/SWIFT Code.
You will also need to specify the amount and in what currency you want it to be deposited on the recipient’s account. The transfer fee for international transfers, especially when made in person, is notably higher than transactions made online. Although, the advantage of personally wiring the money in your financial institution is you can authenticate the transaction easily. Plus, you have a higher transaction amount limit compared to online transfers.
- Third-Party Money Transfer
There are other forms of wire transfer that you might have heard of which includes PayPal, Western Union, and the likes. The downside to these services is that they do not have the same credible history as banks, but they can be reliable at times as well. In fact, PayPal has been one of the popular methods of online transfer and payment transactions.
Similar to banks, these third-party money transfer services also charge transaction fees. Depending on the provider, they may charge by percentage basis or fixed fees per transaction. These money transfer services also converts to other currencies which makes it convenient to send money internationally.
How Long Do Wire Transfers Take?
A typical international bank transfer may take a few days to get cleared while domestic transfer can be completed within the next 24 hours since the transaction was made. To know exactly how long it takes for your wired bank transfers to be completed, you need to call your credit union or bank. Factors that may delay your transaction include public holidays, technical or human errors, and slow-to-pay system in foreign countries.
Remember that under the Dodd-Frank Wall Street Reform and Consumer Protection Act, you are only allowed to cancel a wire transfer for free within a 30-minute period. Longer than that, you would need to check with your bank if you can still discontinue the transaction.