What Is a Wire Transfer?

Christian Zanetis, Relationship Manager, First Republic Bank
January 7, 2022

  • Wire transfers are a way to electronically send money between accounts, both domestically and internationally.
  • To send a wire transfer, you need specific information about the recipient of the funds and their financial institution.
  • Processing timelines and fees can vary depending on the type of wire transfer.

Wire transfers are an incredibly efficient and safe tool for sending money; more than 184 million domestic wire transfers were completed in 2020. What's a wire transfer? It’s a way to electronically send money between individuals or entities via financial institutions.

Understanding how the electronic transfer of funds works in a wire transfer, how to do a wire transfer, types of wire transfers and the pros and cons of wire transfers is important for anyone considering using a money movement.

How a wire transfer works

A wire transfer, sometimes referred to as a wire payment, is usually done in person at your financial institution or through your online banking services. Wire transfers often comes with a fee.

In lieu of actual cash being transferred, detailed information is relayed between the sender's institution and the beneficiary's institution who verify funds, including bank account numbers and routing numbers. Wire transfers are sent through secure systems, including the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and the American Bankers Association (ABA) .

Knowing what financial information is necessary for a wire transfer and how that information is used to complete the transfer is also important.

Information needed for wire transfers

You’ll need specific information for a sender (also known as an originator) to wire money to a recipient (also known as a beneficiary). You’ll want to contact your bank to confirm the details you should request as the sender or supply as the beneficiary, but the following details are usually required to complete a wire transfer:

  • The bank account number the sender is transferring the funds to
  • The recipient’s full name, contact number and physical address
  • The recipient’s bank account routing number (also referred to as an ABA number) and branch number
  • The name and address of the recipient’s financial institution as well as their SWIFT code (a financial institution's specific routing number)
  • The reason for the money transfer

For security purposes, bank’s recommend that you always verbally confirm wire instructions with the recipient before initiating a wire.

Completing the wire transfer

The originator is responsible for paying for the transfer cost upfront, before their financial institution begins the transaction. Bank personnel will only initiate the wire transfer when the sender has sufficient funds in their bank account. Once the transfer is initiated, funds are then immediately deducted.

A few things happen once this information is provided, and the transaction is processed and verified. First, the originator’s financial institution sends specific instructions through a secure messaging system, such as SWIFT, to clear the funds. Once the funds are cleared, the beneficiary’s financial institution receives all the relevant information to deposit funds into the beneficiary’s account.

These transfers happen very quickly, usually the same day, assuming they are submitted before the bank's wire cutoff-time. The timeline for the delivery of funds through wire transfers can vary depending on the institution, but most funds take several hours or business days to process. In many instances, funds deposited into the recipient’s account are immediately accessible without the recipient having to wait for them to clear; this is particularly the case when wire transferring funds between bank accounts in the same financial institution.

The bank wire transfer process can be slightly different depending on the type of transfer.

Types of wire transfers

The two main types of wire transfers are domestic wire transfers and international wire transfers. Both can be interbank or intrabank wire transfers, meaning money can be transferred between different financial institutions or within the same one. Using interbank versus intrabank wire transfers can affect the type of wire transfer you conduct.

Domestic wire transfer

A domestic wire transfer is a wire transfer performed in the same country. This type of wire transfer usually can be performed the same day; its timeline is typically shorter than that for an international bank transfer.

International wire transfer

An international wire transfer is a wire transfer that goes between different countries. In the United States, an international transfer is also regarded as a “remittance wire transfer.” In contrast to domestic payments, this type of wire transfer may take longer, since funds must be processed through the Automated Clearing House (ACH), which is a network for moving money between bank accounts. Other factors, such as time zone differences, affect the timeline for international wire transfer processing.

Depending on the type of wire transfer you’re conducting, costs will vary.

How much does a wire transfer cost?

The cost of a wire transfer can vary depending on whether the transfer is domestic or international, and whether the transfer is outgoing versus incoming to your bank account. Fees for sending and receiving wire transfer funds can vary between $15 and $30, with international fees being more costly. Some banks offer free incoming wire transfers, though they are sometimes capped at a certain number of transactions.

You’re more likely to pay less for a wire transfer if you’re transferring funds through your own financial institution, since wire transfers are sometimes a built-in service offered for clients.

Consider the benefits and limitations to wire transfers before deciding whether to send one. Alternatively, you may want to consider third-party money transfer apps, which are not wire transfers, but may be a better option for your situation.

Benefits and limitations of a wire transfer

Wire transfers can be beneficial in some cases, but they may not always be your best option for transferring money. 

Benefits of a wire transfer

  • Timely transactions: In many instances, wire transfers can be processed in fewer than one business day.
  • Immediate access: Banks don’t place holds on wire transfers once received (in contrast to other payment types, like ACH transfers or check deposits), meaning the recipient can access funds as soon as the money is deposited in their account.
  • More secure: Because funds need to be in an account before transferring them to a beneficiary, there’s no risk in a check bouncing due to insufficient funds. To reiterate, always make sure to verbally confirm wire instructions with the recipient before initiating a wire. 
  • Ubiquitous: Wire transfers are options all over the country and the world, and a common form of payment.

Limitations of a wire transfer

  • Difficult to cancel: Once a wire transfer is processed, it may be difficult to cancel and request to have these funds returned. As a result, it’s critical to confirm the identity of the beneficiary before conducting a wire transfer.
  • Fraud risk: Wire transfers are often the target of fraud schemes since they can be done anonymously. Ensuring the beneficiary is a verified person can negate this risk.
  • Difficult to verify: If you don’t personally know the individual you’re wiring, it can be difficult to verify the identity of the beneficiary.
  • Fees: Most wire transfers come with a cost.

Additionally, understanding the difference between a wire transfer and an ACH transfer is important before sending any funds.

What is the difference between a wire transfer and an ACH transfer?

There are some key differences between a wire transfer and an ACH transfer, also referred to as a “regular electronic transfer.”

An ACH transfer is money sent, usually electronically, between domestic financial institutions. For instance, an ACH transfer occurs when you send money through a mobile banking app to another recipient's bank account. Other examples include credits, such as direct deposit payroll, and debits, such as rent, credit card and utility bills. An ACH transfer is not limited within the same financial institution: It can be sent to any institution the recipient has a bank account with.

Generally, timelines are longer for ACH transfers, since funds need to be verified in order for the transfer to clear. With this in mind, if you feel wiring money is the right option, the first step is to connect with your financial institution to begin the transfer process and understand costs and timing.

Wire transfers and your money

A wire transfer enables you to relatively quickly send money electronically and can be performed both domestically and internationally. It’s generally an easy and efficient process, which can be beneficial for individuals and businesses looking to process payments. 

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