What is a Wire Transfer?

Wire Transfer

A wire transfer is the electronic transfer of funds from one bank to another. Businesses or individuals who are sending large amounts of money typically send wire transfers. When an individual would like to send a wire transfer, they send it through the bank that the money is leaving.

Wire transfers can be sent regardless of your location — city, state, and country. They are considered to be a fast, and safe way to send large sums of money from bank to bank. If you are sending a wire transfer within the U.S. it typically takes up to 24 hours to send. It is important the wire transfer is initiated before a specific time if the sender would like the receiving bank to receive the funds within the same day. Otherwise, international wires may take 2-5 business days.

How Does a Wire Transfer Work?

When transferring funds through a wire, one bank is communicating to another bank or financial institution. By communicating data with the help of a communication network, funds are able to be sent, received, and exchanged. Common networks used are the Society for Worldwide Interbank Financial Telecommunication and Fedwire. These are trusted networks that allow the transfer of funds between banks. 

Most wire transfers can be submitted online. However, some prefer to go into their bank to send a wire. While issuing a wire, the following information regarding the receiving bank will be input: the name, the total amount being sent, and the bank account and routing number. Once the receiving bank or institution receives the transfer, normally an employee will need to review and confirm the wire transfer before it enters the account of the receiver. 

What is an ACH Transfer?

An ACH transfer is also an electronic transfer between two banks. ACH transfers are usually smaller amounts of funds that are being exchanged and typically consist of direct payments and direct deposits.

What is the Difference Between Wire Transfers and ACH Transfers?

While wires are transferred through financial networks, ACH payments are transferred through a clearinghouse. What this means is— a separate agency, corporation, or software is utilized in the midst of the transfer. In other words, a third party is used to transfer the funds and is usually considered safe, depending on the clearinghouse. ACH transfers may take longer to transfer than wires; however, they are cheaper. 

Are Wire Transfers Safe?

Wire transfers are considered to be safe when done correctly. Ensuring you have the receiving party’s correct information is very important. While sending a wire transfer, if any of their information is input incorrectly, you run the risk of sending the funds to the wrong person. If this occurs, once the wire transfer has been initiated, there is no way to cancel the movement of funds. The funds are normally delivered to the receiver’s bank account immediately upon sending a wire transfer. 

Wire transfers can only be sent by the initiating party, or the sender. Funds cannot be taken out of a bank by the receiving end when completing a wire transfer. The money can only be transferred if it is being sent by the bank that possesses it. 

How do I Submit a Wire Transfer?

Submitting a wire transfer may require you to go to the location of the bank that is holding the funds you are sending, where an employee will assist you with the wire transfer. Some banks allow you to submit a wire online. Steps may vary depending on the financial institution you bank with, the receiver’s financial institution, and the country the funds are moving toif an international wire transfer were to be submitted.

Though the steps of a wire transfer may vary, here is typically how the process of submitting a wire transfer works: 

1. Collect the Necessary Information

Sending a wire transfer requires you to know specific information regarding the bank that is receiving the funds in order for the money to safely reach its desired destination. We will go into detail below about what information regarding the receiving end is required. Additionally, the bank will require you to provide specific information to verify your identity. The following list should be considered and thought over prior to submitting a wire:

    • Sender and receiver account numbers 
    • Sender identity verification 
    • Sender’s contact information 
    • The total amount of funds being sent 
    • The date you are sending the wire

2. Determine How You will be Sending the Wire Transfer

If you are submitting a wire transfer online, it will walk you through the steps to submit it. At some point within the process, a fee will be required. To ensure your wire transfer was successfully submitted, you can call the bank for confirmation. Otherwise, you may go into the bank institution where employees will ask you a set of questions regarding the wire transfer and submit the wire transfer for you. The wire transfer fee will also be paid at this time. Depending on the institution you bank with, and the accounts you have open with them, wire fees may be waved. 

3. Submit the Wire Transfer

Once the wire transfer has been submitted, ensure you receive either a paper copy or an electronic receipt. Some banks will require another employee to review the wire transfer before finalizing the submission. Once the wire transfer submission is finalized, it is important to check with the receiver to make sure they have received the funds. 

What Information is Required to Send a Wire Transfer?

A wire transfer cannot be submitted unless the following information regarding the recipient is provided:

    • Full name & address 
    • Bank name, phone number, & address
    • Bank account number 
    • Account type 
    • For domestic transfers – Bank ABA routing number 
    • For international transfers – Bank IBAN and BIC/Swift Code

As previously mentioned, you will need to know the amount of money you will be sending and may need to consider currency conversions if you are submitting an international wire. For security purposes, the bank may ask the reason for the wire transfer. 

What is an ABA Routing Number? 

An ABA routing number is a 9-digit number for U.S. banks to identify bank accounts. 

What is an IBAN?

An IBAN is a code used by international banks. It is made up of a set of 34 combined numbers and letters. This set of numbers and letters help indicate the country and branch location of the wire transfer. 

What is a BIC/SWIFT code? 

A BIC or SWIFT code is a code that represents a specific bank branch. It is used for international wires as well. 

What are the Pros and Cons of a Wire Transfer?

While many individuals prefer wire transfers because of their pros, there are also cons to wire transfers. Let’s take a look at the pros and cons of transferring funds through a wire transfer. 

Pros 

    • Funds are immediately transferred
    • Ability to safely transfer large sums of funds
    • Able to send funds internationally
    • Considered safe

Cons 

    • Can become costly 
    • Maybe timely 
    • Cannot be reversed or canceled after submission
    • Scammers may ask for a wire transfer

Depending on your preference and needs, wire transfers may be best for transferring funds. If you are trying to transfer funds from a U.S. bank to an international bank, wire transfers are the only option. Additionally, ACH payments restrict the amount of money you can transfer, leaving wire transfers the only way to transfer large payments. Businesses usually resort to wire transfers when transferring large amounts of money. 

One major con of wire transfers is scammers may attempt to request a wire transfer from you. Scammers will alert you about a false, large payment that is due and give you their information. Once the money is sent, there is no way of getting it back. 

How Long Does a Wire Transfer Take?

Wire transfers that are being sent from a U.S. bank to another U.S. bank can take up to 24 hours. International wires may take up to 5 days to transfer.

Here’s why:

1. When the Wire Transfer was Initiated

The Expedited Funds Availability Act (EFFA) promotes wire transfers to be available within one business day of its submission. Though this is required, banks have cut-off times for wire transfers. This is because the receiving bank is expected to look over the transfer and can’t do so if they are closed. For example, if a wire transfer is initiated on a Monday at 5:00 p.m., but the receiving bank closes at 5:00 p.m., the receiving bank will not receive the funds until Tuesday. Furthermore, wire transfers that are submitted on weekends and on federal bank holidays will not be received until the following business day. 

2. Where the Wire Transfer is Being Sent 

U.S. wire transfers can be received immediately or may take up to 24 hours. While U.S. domestic wire transfers are expected to be completed within 24 hours of submission, international wires between U.S. banks and banks within other countries can take 1-5 business days because of different time zones, banking systems, and foreign currencies.  

3. How the Wire Funds are Transferred

There are several different ways a wire transfer can be processed. One way is by utilizing a service known as FedWire. This is an immediate transfer that consists of a large amount of money or is a transfer that involved a time-sensitive situation. CHIPS is utilized when a bank needs to send multiple wire transfers for net settlement. Lastly, the Society for Worldwide Interbank Financial Institutions, also known as SWIFT, is used for international wire transfers. 

How Do You Track a Wire Transfer?

If you sent the wire to the right account, you will be able to track the wire. On the other hand, if the wire transfer is sent to the wrong account on accident, the wire transfer will not be able to be tracked. 

It is possible that the wire transfer may be delayed or lost. Fortunately, if the wire was submitted correctly, you will be able to track the wire transfer. When a wire transfer involves a U.S. bank account, they are assigned a tracking number known as IMAD/OMAD ID. This tracking number is provided to the sender once the wire transfer has been submitted. 

If a domestic wire is submitted and it takes over 24 hours to send, you can ask your bank to track the wire using the IMAD/OMAD ID number. The same goes for international wires that have not been sent within the 5 days of submitting the wire. When tracking the wire transfer, it will provide you with details regarding when and how the transfer was processed. This includes all ends of the transfer — the sender, receiver, and banks involved. Lastly, it shows where the wire transfer currently is in the time you track it.

What is a Domestic Wire?

Domestic wires are transfers that occur within the same country. It is when funds are transferred from one bank to another within the same country. Typically, they can be delivered immediately upon sending, and can take up to 24 hours for the receiving bank to receive the funds. Furthermore, domestic wires are cheaper than international wires. Depending on the institution you bank with, domestic wires can cost anywhere from $0-$35 per transfer. Some banks may allow you to send wires online at a cheaper price. Alternatively, going into the bank to send a wire can become costly. 

What is an International Wire?

International wires are transfers submitted from one country to another. Funds are sent between two different countries, normally costing anywhere from $35-$50. Because of security reasons, the wire transfer can take anywhere from 1-5 days. Similar to domestic wires, submitting a wire online may be cheaper than going into the bank to send an international wire. Additionally, there may be foreign currency conversion fees. Some banks also perform additional security steps prior to sending the wire. These banks will check the wire transfer before actually sending it. 

How Do I Cancel a Wire Transfer?

You cannot cancel a wire transfer once it has been initiated. However, if the receiving bank gets a cancellation notice before the transfer, they may be able to stop the transaction. Furthermore, if a mistake is made by one of the banks involved in the wire transfer, the bank can cancel or edit the transfer that has been completed. 

How Much Does a Wire Transfer Cost? 

Because of the process and precautions, sending a wire transfer can be costly. Sometimes the receiver of the wire transfer may also have to pay a fee. The fee will depend on the bank’s policy, the location of the receiver, and the amount of the funds being transferred. 

Here is how much wire transfers cost on average:

    • Domestic outgoing wire transfer – $26.00 
    • Domestic incoming wire transfer – $15.00
    • International outgoing wire transfer – $45.00
    • International incoming wire transfer – $15.00

While receiving a wire transfer is normally free, sometimes a small fee is required to complete the transfer, or calculate foreign currency. 

Are Wire Transfers Reported to the IRS?

Wire transfers are monitored by many international organizations. The IRS can see any wires that are transferred within the U.S., or to and from the bank accounts of U.S. citizens. Wire transfers may be flagged by the IRS for the following reasons:

    • Transfers that have a pattern
    • Extremely large amounts being transferred 
    • Transfers made to individuals who do not have a personal or business bank account

Are there Wire Transfer Alternatives? 

There are many ways to electronically transfer money from one bank to another. ACH transfers are a great alternative to wire transfers. The following ways are methods you can use to electronically transfer funds:

Money orders and checks are also an option for when you need to send money, however, they are less secure than the above-mentioned methods.