A wire transfer is a fast and secure exchange of money electronically between financial institutions using direct transfer of account information.
Banks and other providers offer this type of money transfer service, originally named for the telegraph wires used to communicate money exchanges between bank accounts. Wire transfers are also known as remittance transfers.
Wire transfers differ from ACH transfers (such as direct deposit) because the networks connecting financial institutions for wire transfers are instantaneous. Automated Clearing House transfers are between banks or through payment apps. Examples of ACH transfers include direct deposit, Venmo, Paypal, and others, but utilize a different network for transfers than the more rapid and powerful wire transfers.
Are wire transfers safe?
Wire transfers are as secure as the people who place them. If you know and trust the receiving bank and have careful documentation of the money transfer, a wire transfer is a very secure and safe way to send money. Never give out your account information or identifying information whether you’re the initiating bank or the recipient bank.
Pros and cons of wire transfers
Wire transfers are trusted for their speed and security. You can quickly send money and expect it to arrive in the correct bank account for the correct amount within a day. Wire transfers are frequently used to close business deals or real estate transactions.
Pros and cons of wire transfers
|Completed within hours||Costs around $27 on average|
|Immediate access to funds||Effort and time to submit|
|Large transactions||Irreversible & difficult to cancel|
|International transfer capability||Commonly used in scams|
Wire transfers are often the only option for international money transfers, or for very large transfers that exceed the limits of an ACH transfer. That’s why wire transfers are frequently used for businesses sending or receiving funding, closing large real estate deals, acquisitions, and other large business transactions.
Drawbacks of wire transfers include the fees, information and effort required to send the funds, and that the exchange of funds is usually irreversible. Scammers often target consumers through wire transfers for this reason, so it is important to only conduct wire transfers when you’re certain of the receiving party’s intention.
How do wire transfers work?
Wire transfers are essentially data communicated from one bank or financial institution to another. A communication network is used for this exchange, most likely the Society for Worldwide Interbank Financial Telecommunication (aka SWIFT), but others like Fedwire are common.
The issuing institution will send name, total, and bank account and routing numbers to the receiving institution. When a wire transfer comes into the receiving institution, usually an employee needs to go through a few simple steps to confirm and complete the transfer.
Are wire transfers reported to the IRS?
The IRS may be interested in wire transfers made in regular intervals, to individuals without personal or business bank accounts, or in very large amounts. The IRS is able to see any wire transfers through US banks or US citizens, and banks are required to report any suspicious activity they see through wire transfers in or to limit illegal activity.
Investopedia reports that international wire transfers are closely watched by multiple international organizations, including the Office of Foreign Assets (part of the US Treasury) control to prevent money being transferred illegally for money laundering or to a terrorist organization, for example.
How much does a wire transfer cost?
Some banks offer free domestic wire transfers for sums of money under a certain limit. Walmart offers cash wire transfers through MoneyGram for only $4 a transfer. Other banks may charge between $20-40 to send domestic wire transfers.
International wire transfers cost more, as we’ll address in a minute, but understand that additional logistics such as institutional processes and rate exchanges make international wire transfers significantly more expensive. They may be a percentage fee of your wire transfer total (3-5% of the total funds) or a flat rate such as $45 per transfer. Make sure you don’t forget that the exchange rate will change your totals.
Average cost of a wire transfer
A domestic wire transfer costs an average of $27 at a domestic bank or credit union.
An international wire transfer costs an average of $45 at an international bank or credit union.
If you fund a wire transfer through a credit card it is defined as a cash advance. Cash advances will incur fees as well as interest rates, on top of the cost from whatever institution is sending the wire transfer.
Receiving a wire transfer is usually free, but occasionally requires a small (less than $20) fee for access and completion. There may be fees or special calculations for foreign currency. If you’re planning on sending money via wire transfer regularly, it may be smart to consider sending larger funds less frequently to minimize cost for sender and receiver.
How long does a wire transfer take?
Most domestic wire transfers arrive within 24 hours, but can take up to 3 days.
Most international wire transfers arrive in 2 days, but can take up to 5 days.
Wire transfers can show up even within a few hours, and do not take additional time to officially “clear” unlike checks which can bounce. Of course, if a wire transfer is submitted toward the end of business hours or on non-business days it may take a little longer – up to three days. There are many factors which can impact the speed of a wire transfer.
Domestic & international wire transfers
Domestic wire transfers are those taking place within the same country. Domestic wire transfers are usually lower in cost and can be delivered the same day. In fact, domestic transfers can show up in the receiving account within just hours. Domestic wire transfers can cost you $0-25 per transfer depending on your institution. Online banking solutions may have included domestic wire transfers, just check with your bank.
International wire transfers are more expensive, and take longer. International wire transfers have to run through ACH transfers as well as through any institutions in the receiving foreign country, which varies. You can expect an international wire transfer fee of $35-45 per transfer. The issuing institution, such as Chase Global Transfer, may complete its own internal reviews and verifications. There may also be fees or conversion factors to change to foreign currency.
How to make a wire transfer
The easiest way to make a wire transfer is through your bank. Most money transfer providers have a quick, outlined process ready for you to complete – such as an online or paper form requesting the necessary information. You will need the name, institution, accounting, and routing numbers of the receiving individual in order to send the funds. You may also need a specific SWIFT, BIC, or IBAN code, which your bank can manage for you. The sender usually pays the fees for a wire transfer service.
Where can you make a wire transfer?
If you don’t have a regular online banking institution or don’t have access to your bank, you can utilize a non-bank wire transfer through Western Union or similar money transfer providers. They can run the wire transfer through your bank, which takes more time, or you can fund the wire transfer through your credit card for additional fees. Most of these banks or financial institutions also offer electronic transfers through ACH payments which can be faster and easier.
How to submit a wire transfer
- Gather your information: Name, bank, account numbers, totals, etc.
- Talk to your bank: Your bank will be able to provide additional codes, and you may be able to submit a wire transfer via phone.
- Double check all your information: Confirm all information with your bank, and with the receiving party.
- Submit the transfer: Whether online, over the phone, or in person, you will transmit all of the information for the transfer.
- Pay associated fees: Sender will cover a wire transfer fee, and there may be a fee for the receiver to cover before gaining access.
- Save your receipts: In the event of an error or for accounting purposes, it’s always smart to keep all receipts and records of a wire transfer.
To receive a wire transfer, only send your banking information to a trusted party. Call your bank to ensure that you’re sending the correct account numbers and information. You may need to pay a nominal fee to receive a wire transfer service.
Whether sending or receiving a wire transfer (or any electronic transfer), be sure to protect your funds and identity by confirming details via phone and with the participating institutions, because wire transfers are rapid and final. It never hurts to double check your information and confirm with a human being to ensure there are no shady scams going on.
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