What is a wire transfer?

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A wire transfer can be a good option if you need to transfer money to another person or business quickly. Wire transfers are a method of moving money from one bank account to another and can be completed in as little as one day. 

Whether you're closing on a home or sending money to loved ones abroad, wire transfers have become a secure and fast way to move money.

What is a wire transfer? 

Wire transfers are a direct, electronic transfer of funds between bank accounts. The term "wire transfer" dates back to when banks used telegraph wires to communicate and send money. Today, wire transfers are entirely digital.

When you initiate a wire transfer, you instruct your bank to transfer funds from your account to the recipient's account. The funds are immediately taken from your account and credited to the recipient's account within one to two business days.

Wire transfers are typically faster and more secure than other money transfer methods, such as checks or ACH transfers. They involve direct communication between banks and require strict verification procedures.

"Wire transfers are a direct transfer of funds from one bank account to another, while other money transfer methods may involve intermediary steps or services such as cashing a check or using a third-party payment platform," says Michael Collins, CFA and founder of WinCap Financial. 

Because of this speed and security, wire transfers often cost more than other transfer methods. Once a wire transfer is completed, it's often difficult to reverse or cancel — so all recipient information must be accurate before initiating the transfer. 

"Wire transfers play a crucial role in facilitating large or time-sensitive transactions due to their speed and security," says Michael Hills, a financial advisor with Apex Wealth. “For businesses involved in high-value transactions such as real estate deals or international trade, wire transfers offer a reliable way to ensure prompt payment delivery and mitigate the risk of payment delays or fraud.”

How wire transfers work

The steps involved in sending a wire transfer may vary slightly from one bank to another. You can often complete a wire transfer by logging into your bank account online.

Once you choose the account you want to send money from, and how much you want to set, you’ll need to provide your bank with some key information:

• The recipient's name and address
• The recipient's bank account number
• The recipient bank's name and address
• The recipient bank's SWIFT code or routing number (for international transfers)

Your bank will then communicate with the recipient's bank to transfer the funds. The money is taken from your account immediately and will be credited to the recipient's account within a few business days, depending on the banks involved and whether it's a domestic or international transfer.

One important number to include is the routing number (for domestic transfers) or SWIFT code (for international transfers). Routing numbers are 9-digit codes used to identify banks within the United States, while SWIFT codes are unique identification codes used for international bank transactions.

"SWIFT codes and routing numbers play essential roles in both international and domestic wire transfers," says Hills. “SWIFT codes identify specific banks during international transactions, facilitating the smooth transfer of funds across borders. Routing numbers, on the other hand, are used in domestic transfers within the United States to identify the sender's and recipient's banks.”

Types of wire transfers 

There are two main types of wire transfers: domestic and international.

• Domestic wire transfers involve sending money within the same country. They are typically processed through the Federal Reserve Wire Network (Fedwire) or the Clearing House Interbank Payments System (CHIPS). These transfers are usually faster and cheaper than international transfers, and funds are often available to the recipient on the same day.
• International wire transfers involve sending money to a recipient in another country. These transfers are typically processed through the SWIFT network. Due to the additional processing and currency conversion involved, international wire transfers may take longer (up to several business days) and cost more than domestic transfers.

How long does a wire transfer take? 

The speed of a wire transfer depends on the type of transfer, the banks involved, and the time of day the transfer is initiated. Some domestic transfers can be completed in as little as one business day, while international wire transfers may take a few business days.

"The time it takes for a wire transfer to be completed can vary depending on several factors such as the destination country, currency conversion requirements, and banking system processes," says Collins.

It's important to be aware of cut-off times, as some transfers initiated after a certain time may not be processed until the next business day. If the sender provides any incorrect information, that can cause delays. 

How much does a wire transfer cost? 

Wire transfer fees can vary widely depending on the bank, the type of transfer, and the amount being sent. However, the cost to send a domestic wire transfer is often less than an international one.

On average, domestic outgoing wire transfers cost between $0 and $30, and outgoing international wire transfers cost between $35 and $50. Some banks may also charge the recipient incoming wire transfer fees. Before initiating a transfer, it's essential to check with your bank for their specific wire transfer fees.

Pros and cons of wire transfers

Wire transfers offer several key benefits:

• Wire transfers are one of the fastest ways to send money electronically. Domestic transfers can often be completed within a few hours, while international transfers may take a few days.
• Wire transfers are processed through secure networks and require extra authentication, making them a safe way to send money.
• Because wire transfers are processed directly between banks, there's less risk of the funds getting lost or delayed in transit.
• The SWIFT network connects banks worldwide, so wire transfers can be sent to almost any country.

But there are some potential drawbacks to consider:

• Wire transfers have higher fees than other transfer methods, especially for international transfers. These fees can range from $25 to $50 or more.
• Once a wire transfer is sent, it's very difficult to cancel or reverse. If you make a mistake (like sending the wrong amount or providing incorrect information), you may not be able to get your money back.
• Banks have daily cut-off times for processing wire transfers. If you miss the cut-off, your transfer may not be processed until the next business day.
• Because wire transfers are irreversible, they can be a target for scammers. It's important to only send wire transfers to trusted recipients and to be wary of any unsolicited requests for wire transfers.

When to use a wire transfer

Wire transfers are particularly useful when you need to send a large amount of money securely and quickly. Common situations include real estate transactions, business payments, emergency funds, and international transactions. 

"Wire transfers are usually used to send large amounts of money like if you’re buying a house, making a significant purchase for your business, or paying a vendor," says Darius Kingsley, head of Consumer Banking Practices for JPMorgan Chase.

Wire transfers are best for these types of transactions because they’re often faster than other forms of moving money. Wire transfers can also be tracked to ensure the successful delivery of funds.

How to send a wire transfer

The specific process for sending a wire transfer may vary slightly from bank to bank, but generally, you'll need to follow these steps:

1. Gather the necessary information: You'll need the recipient's name, address, bank account number, and the recipient bank's routing number or SWIFT code.
2. Contact your bank: You can usually initiate a wire transfer online, by phone, or in person at a bank branch.
3. Provide the transfer details: Specify the amount you want to send, the recipient's information, and any additional instructions.
4. Verify and confirm: Double-check all the information to ensure it's accurate. Once you confirm the transfer, the funds will be deducted from your account.
5. Save your receipt: Keep a record of the transaction, including the confirmation number, for your records. 
   It's important to note that some banks may have additional security measures for wire transfers, such as requiring a PIN or security token.

Wire transfer alternatives 

While wire transfers are a popular choice for many situations, they're not the only way to send money electronically. Some alternatives include personal checks, money orders, and peer-to-peer payment apps. 

Two other alternatives include ACH transfers and bank-to-bank transfers. Automated Clearing House (ACH) transfers are often used for direct deposit of paychecks, bill payments, and other recurring transactions.

They're generally cheaper and slower than wire transfers. Some banks also allow you to send money directly to accounts at other banks using their online or mobile banking platforms.

The best option for you will depend on the amount you're sending, how quickly you need the funds to arrive, and any fees involved.

Frequently asked questions about wire transfers 

The bottom line 

Wire transfers offer a safe and relatively quick way to send money. When used appropriately, wire transfers can be a valuable tool for managing your finances, whether making a large purchase, sending money to loved ones abroad, or conducting business transactions. By comparing wire transfers to other money transfer methods, you can ensure you use the most suitable option for your specific needs. 

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.