When you need to transfer money quickly and safely to someone overseas, an international wire transfer is a common and reliable method used all around the world. The term “wire transfer” originates from the days when money was transferred over telegraph wires, but it is now used as a generic term for electronic transfers.
The goal of wire transfers is the quick transfer of funds, eliminating the delays caused by mailing and clearing of checks. While people often use the terms “wire transfer” and “bank transfer” interchangeably, this is not 100% accurate: wire transfers are used by both banks and non-banking financial institutions. This means that all bank transfers are wire transfers, but not all wire transfers are bank transfers.
A wire transfer is the electronic transfer of funds from one person to another via a bank account or a money transfer account held with a specialised provider (e.g. a credit union). There is no physical transfer of money between banks or financial institutions when conducting a wire transfer. In fact, only information is exchanged between the institutions about the recipient, their account details and the transfer amount, with the transfer itself happening electronically.
The difference between wire transfers and bank transfers
The two terms wire transfer and bank transfer are often used to describe the same thing, but this is not always the case. A bank transfer is a term used to describe the process of transferring money from one bank account to another. This transfer could happen between two different types of bank accounts of the same person (for instance from a savings account to a checking account), but more commonly the term refers to the process of transferring funds from one location to another (even overseas) via banks.
Conversely, a wire transfer is more generic terminology which refers to sending money electronically from one location to another. So, we can say that a bank transfer is a type of wire transfer, along with other types of wire transfers as well. For example, to send money from the US to France you may use bank transfer or you may wire it through MoneyGram, Western Union or another money transfer provider.
Pros and cons of wire transfers
Wire transfers offer a convenient and secure way to transfer money across borders, which is why they are one of the most popular ways of sending money. Whether you want to send funds to your family living overseas or to one of your suppliers in another country, wiring funds is a simple and efficient money transfer method.
Here are some of the pros and cons of using wire transfers when transferring your money:
Speed: In most instances wire transfers take 1-2 days. In some cases and depending on the currency, the amount and the service you are using, the transaction can be near-instant.
Safety: Both banks and specialised money transfer providers must adhere to financial regulations put in place in the country they operate in. Wire transfers are a commonly used method of sending funds, so any business that offers money transfer services will have experience keeping your transactions secure.
Convenience: You can send money to any part of the world from the comfort of your home via the internet. All you have to do is log in to your online banking and make a transfer. However, circumstances might be different for those planning on sending a large sum. On these occasions, your provider might require some additional information.
Global reach: Wire transfers can facilitate the delivery of funds to almost anywhere in the world, in any currency (as long as you find the right provider).
Cost: Wire transfers can be expensive; there are several money transfer companies that have decreased their costs substantially, so research is crucial. Generally speaking, wire transfers are likely to be accompanied by higher exchange rate markups and fees than some other payment methods.
Non-reversible: If a mistake is made when entering details of the wire transfer, it can be very hard to reverse. Be sure to double check details are entered correctly before sending.
How do wire transfers work?
The majority of international wire transfers are processed via the SWIFT network. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a secure messaging system used by banks to exchange information quickly and securely, including instructions for wire transfers. This network spans 200 countries and includes over 10,000 banks and financial institutions.
If you live in Europe, your wire transfer is likely to be processed as a SEPA payment. SEPA (Single Euro Payments Area) operates in a similar way to the SWIFT network, but its purpose is to provide low cost and fast Euro-denominated transfers to the 36 countries that are part of the group. All 27 EU states are members of this group.
When you send a wire transfer, the instructions are sent to the recipient’s bank either directly or through an intermediary bank. There are costs associated with using the network, which can vary depending on the currency and amount being sent, so be sure to check before making your transfer.
Most money transfer companies enable wire transfers in the same manner, but they operate a bit differently. They employ specialised technologies that connect local banks across the world, helping to reduce costs and transfer times. We will talk more about choosing the best money transfer providers in the upcoming sections.
How to send a wire transfer?
Sending a wire transfer is generally pretty straightforward. The process typically works as follows:
1. Decide on a money transfer provider
There are basically two types of institutions that enable wire transfers: banks and non-banking financial institutions such as MoneyGram, Transferwise and OFX, to name a few.
A bank will allow you to send money from your bank account to other accounts around the world, but usually charge high fees in the process.
With non-banking financial institutions, you’ll usually be able to select wire transfer as a method of payment once you have set up a transfer.
Before you decide which provider to use for your wire transfer, make sure you compare the costs, transfer speed and any other important factors.
When sending the same amount via wire transfer, the flat fee and exchange rate markups can vary considerably. Comparing services is essential to ensure the most favourable monetary value reaches the recipient’s account.
Regardless of whether you choose a bank or a money transfer company to wire your money, you will need to provide certain details.
Your provider may need the following details to initiate the wire transfer:
The recipient’s name and address
The recipient’s account number or IBAN (International Bank Account Number)
The recipient’s bank name and address
The SWIFT/BIC code of the recipient’s bank
The transfer amount and currency
Any additional information that the provider requires
3. Familiarise yourself with the fine print
Before you initiate the wire transfer, confirm the amount you will be paying for fees, the exchange rate you will receive, the delivery date and the amount that will be deposited to the recipient’s account.
While some banks and money transfer providers have online tools that let you calculate the exact costs before you make a transfer, others will only reveal the final cost after you are ready to make a transaction.
4. Fill out the wire transfer forms
Remember, a wire transfer is irreversible. If you fill out the form incorrectly, you may end up sending your money to someone else. So make sure you check all the details carefully before submitting all the details; this includes your recipient’s bank account details and the exact amount you want to send.
5. Track your wire transfer
Once you have initiated a wire transfer, you can track it using the transaction number provided by the bank or payment provider. If there is a delay, you can use this information to follow up on the status of the transfer.
What are the fees associated with wire transfers?
Wire transfers, despite their convenience, are not always the cheapest way to send money. When making an international wire transfer, the two costs you will have to look out for are exchange rate mark-ups and fixed transfer fees.
Exchange rate mark-ups
Most people search the exchange rate before making an overseas wire transfer and expect to get the same exact rate for their transaction. However, this is rarely the case. Banks and financial institutions charge a markup on the mid-market rates (the rate you see on search engines and from financial news services). Banks are known to charge 4 – 6% margins, whereas specialised money transfer providers often keep their margin at 0.5 – 2%. It’s important to compare the exchange rates before you go ahead with the transaction, especially if sending a large amount of money as a small percentage increase can cost you a lot of money.
To make a wire transfer, you may have to pay a fixed fee to the bank or provider. The fee can range anywhere from $15 – $45 depending on the bank or payment provider you choose. Banks typically charge both a fixed fee and an exchange rate margin on wire transfers.
Wire transfer fees can be quite high depending on the number of intermediary banks involved. However, there are many money transfer providers that charge only a fixed fee and no exchange rate margin. This fee is sometimes also much lower than you’ll find with a bank. Again, it is all about choosing the right provider.
How long do wire transfers take?
Wire transfers can take anywhere between 1 – 5 days depending on various factors including the origin and destination country, the amount being transferred and the currencies used. Many non-bank transfer providers are able to reduce the transfer times by utilising technology that connects local bank accounts across the world. Some even offer near-instant transfers for users transferring money along a corridor in which the provider specialises.
A wire transfer is a method of transferring money electronically between people or businesses across the world. It only involves exchange of information between the institutions about the recipient, their account details and the transfer amount. This means that a bank transfer is a type of wire transfer, but there are other non-banking financial companies that can also facilitate wire transfers. Examples of these services are money transfer companies such as Transferwise, WorldRemit, and Azimo.
Wire transfers offer a convenient and secure way to transfer funds. You can send money anywhere in the world. However, it’s good to be aware that they can be costly as you may have to pay both a fixed transfer fee and exchange rate mark-ups when sending your money. These fees are often higher than you’ll find with other payment options.
It is important to shop around and make comparisons to get the best rates and lowest fees on your transaction, as there are a lot of providers now offering wire transfer services at different rates. By quickly comparing your options by filling out our form, you can find out your best option in minutes and ensure your recipient gets the maximum amount possible of the money you are sending.
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