If you’re shopping for your first house or supporting a relative who recently moved abroad, your first wire transfer looms in your near future. That almost certainly means you’re wondering what a wire transfer is.
Relax — it’s not as scary as it sounds. A wire transfer is an everyday financial transaction. Banks and money transfer companies like Western Union process millions of them each year.
But you should know how they work — and their risks and costs — before you send your first one.
What Is a Wire Transfer?
A wire transfer is a method of electronically transferring funds from one individual or entity to another through a network of banks or financial institutions.
It securely and rapidly moves money between accounts, either domestically or internationally. It’s most often used for large transactions, such as a property down payment, or transactions you need to complete quickly.
Though scammers can use wire transfers to steal money from unsuspecting people or businesses, the transfer itself is more secure and reliable than credit card payments. As long as you know (and confirm) the recipient’s identity and bank details, the transfer is very unlikely to fail or end up in the wrong account.
How Wire Transfers Work
In a typical wire transfer, the sender provides their bank with the recipient’s banking information, including account number and bank routing number. The sender’s bank then initiates the transfer by sending a secure message to the recipient’s bank, requesting the movement of a specific amount of money.
Once the receiving bank verifies the information and confirms the transaction, the funds move from the sending account to the receiving account.
This process generally takes a few hours. However, international wire transfers can take up to three business days, depending on the origin and destination country, the banks and people involved, and whether any government entities flag the transfer as suspicious.
Unlike credit card transactions, wire transfers are difficult to reverse. To reduce the risk of an errant transfer, always double-check your banking information, the transfer amount, and the recipient’s banking information.
Wire Transfer Costs
Most banks charge fees to send wire transfers. The fees vary depending on the type and amount of the transfer and whether the bank must convert the funds into a different currency, but expect to pay:
- Domestic outgoing transfers: $10 to $50 (may be waived by a growing number of banks)
- International outgoing transfers: $20 to $80 (plus currency conversion fee)
- Incoming (receiving) transfers: $10 to $30
Currency conversion fees on international transfers typically range from 1% to 3% of the transaction amount but can vary by bank and currency.
Wire Transfers vs. Bank Transfers
Wire transfers and bank transfers are similar from the participants’ perspectives, but there are some key differences:
- Speed: Like wire transfers, bank transfers also move between two bank accounts. However, bank transfers rely on the Automated Clearing House (ACH) network, which batches and sends transactions throughout the business day. Domestic bank transfers can take one to three business days to settle, while international transfers can take up to five business days.
- Cost: Wire transfers are more expensive than bank transfers, so only use wire transfers when you can’t wait the few days bank transfers take. Domestic bank transfers are generally free, and international bank transfers may only carry a currency conversion charge.
- Repeatability: Bank transfers are easier to automate than wire transfers, so they make more sense for recurring transactions like utility bill payments and paycheck direct deposit. By contrast, you generally need to verify your identity and provide custom wiring instructions for each new wire transfer.
- Size: Bank policies differ, but wire transfers generally have much higher maximum value limits than bank transfers. That makes wire transfers better for large transactions, like making a property down payment (or buying the whole house in cash).
Other Alternatives to Wire Transfers
Due to the cost and limited repeatability, a wire transfer is rarely the best way to send money or fund a purchase. Besides bank transfers utilizing the ACH system, there are other electronic alternatives:
- Credit and debit cards: You probably use your credit or debit card several times per week, if not more. It’s clearly the best option for everyday purchases online and in real life. Try asking the cashier to process a wire transfer next time you’re buying groceries and see what happens.
- Person-to-person transfers: Person-to-person transfer apps like Venmo are ideal for smaller transfers between friends, like splitting a dinner bill or covering your share of a vacation rental. They can also work well for product or service purchases from vendors that don’t take credit or debit cards, like your local farm stand or your go-to pet sitter.
Types of Wire Transfers
Wire transfers allow individuals and businesses to quickly move money between accounts. But there are different types available, each with their own advantages and limitations.
Domestic Wire Transfers Between Banks
A domestic bank wire transfer is a wire transfer between two accounts at banks within the same country. People commonly use them for large transactions that exceed spending or transfer limits set by other payment methods, such as credit cards and person-to-person transfer apps.
For example, when closing a real estate transaction, you might use a wire transfer to send your down payment to the escrow company’s bank, which later executes another wire transfer to the seller’s bank.
Domestic wire transfers settle faster than international wire transfers because they only pass through one country’s banking system. Many settle within minutes to a few hours.
International Wire Transfers Between Banks
An international bank wire transfer sends funds between accounts at banks in different countries. Most international wire transfers between banks utilize the Society for Worldwide Interbank Financial Telecommunications (SWIFT) system, which supports secure communication between more than 10,000 member institutions.
International wire transfers take longer because they must pass through two countries’ banking systems. They also tend to face stricter scrutiny from financial regulators looking for signs of money laundering or other illegal activities. In addition to increasing the time international bank wire transfers take to settle, this added complexity increases their cost, which banks pass along to transaction participants.
Nonbank Wire Transfers (Domestic or International)
A nonbank wire transfer sends funds without using a domestic or international bank. Instead, a private money transfer service like Western Union or MoneyGram processes the transaction.
Western Union and MoneyGram operate thousands of transfer points in North America and thousands more abroad, often in superstores, grocery stores, and convenience stores. When sent internationally, money transfers routed through one of these services are known as remittance transfers.
To send money through Western Union or MoneyGram, you need the recipient’s name, pickup location, and possibly other personally identifiable information. However, for smaller transfers, you generally don’t need to provide the recipient’s banking account number, routing number, or SWIFT code. They can pick up the funds in cash at a transfer point near them.
Likewise, you don’t need to involve your bank account in smaller nonbank wire transfers. You can fund the transfer and pay any associated fees with cash. But you may need to link your bank account for transfers over $5,000, though you can do so for lesser amounts if you’re concerned about the practicality or security of carrying large amounts of cash to the transfer point.
How to Send a Wire Transfer
Every bank and nonbank money transfer service has its own wire transfer procedures, so you should clarify the rules that will apply to your transfer before getting too deep into the process. But in general, you can follow these steps to send a wire transfer.
- Gather the recipient’s information. Depending on the bank or transfer service’s policies, you must provide the recipient’s full name, address, and bank account number. For international transfers, you also need the recipient’s bank’s SWIFT/bank identifier code or international bank account number (IBAN). Some banks also require the recipient bank’s mailing address and a specific reason for the transfer.
- Contact your bank or transfer service. Visit your preferred bank branch, call their customer service, or log in to your online banking account to initiate the wire transfer. For real estate and certain other major transactions, you can probably approve the transfer in their office. And if you’re using a money transfer service, you likely need to visit one of their transfer points in person.
- Verify your identity. Before you can complete a wire transfer, you must verify your identity. In the United States, the easiest way to do so is with a photo ID, like a driver’s license or state ID card.
- Provide the required financial information. That includes your bank account information, the recipient’s banking information, the amount you want to transfer, and (for international transfers) the recipient’s currency. Double-check every detail, as wire transfers are difficult to reverse once initiated.
- Confirm you have sufficient funds in your account. Your bank account must have enough to cover both the transfer amount and the fees. If you’re making a cash transfer, bring enough extra cash to cover the transfer fee.
- Execute and confirm the transaction. Once you’ve submitted all the required information and authorized the transfer, the bank or transfer service processes the request. Keep a record (receipt) of the transaction for future reference.
- Verify that the transfer goes through correctly. Contact the transfer recipient the next business day to confirm they received the funds. If they haven’t, follow up each business day until they do. If more than three business days pass without confirmation, contact the bank or transfer service to confirm the funds went to the correct recipient.
Advantages
Wire transfers are a popular payment method for those who need to transfer large sums of money quickly and securely. They offer a range of advantages, especially for potentially life-changing transfers, such as a down payment on your dream home.
Transfers Often Settle Within Hours
Domestic wire transfers often settle on the same business day. International wire transfers can take a few business days, depending on the destination country and intermediary banks involved in the transaction. But they’re still the quickest way to reliably send money abroad.
Larger Transactions Are No Problem
Wire transfer limits vary by provider, but they’re generally quite high — on the order of $100,000 or more per day. The bank can also increase them on a case-by-case basis, like a six-figure down payment on a house or all-cash real estate purchase.
By contrast, credit cards typically have much lower transaction limits. Depending on your creditworthiness and income, you might be limited to just a few hundred to a few thousand dollars in charges before you hit your card’s spending cap, at which point you have to pay down your balance if you want to spend any more.
Ideal for International Transfers
A wire transfer is usually the best way to transfer larger sums overseas. Money transfer services like Western Union and MoneyGram are particularly good at international transfers. Often, they make funds available to the recipient within hours, though transfers can be delayed if they’re flagged by regulators.
No Risk of Failure
Banks and money transfer services only approve wire transfers after confirming the sender has enough funds to cover the transfer amount and any fees. For banks, that means confirming the sender’s account balance is sufficient. For money transfer services, it often quite literally means counting out their cash.
By contrast, paper checks and electronic bill payments can fail (“bounce” is the term used for checks) due to insufficient funds.
Disadvantages
While wire transfers can be a fast and secure way to send money, they may not be the best option for everyone or every situation. Like any financial transaction, wire transfers come with their own set of drawbacks.
May Have High Fees
Unlike bank transfers and credit card transactions, wire transfers generally cost the person or entity who initiates the transaction. Domestic wire transfers are cheaper but can still cost up to $50 per transaction. International wire transfers can cost $80 or more, depending on the bank, destination country, and other factors.
Some may even charge the person who receives the money.
Subject to International Processing Issues & Regulatory Scrutiny
International wire transfers in particular are vulnerable to processing delays and time-consuming regulatory scrutiny.
On the processing side, every international transfer passes through two banking systems. Time zone differences and local banking system quirks can add hours and days to processing times.
Wire transfer regulation varies by country, but the U.S. Treasury’s Office of Foreign Assets Control reviews all international transfers originating in the United States. Its job is to prevent potentially illegal transfers, such as those supporting international terrorism, tax evasion, or money laundering activities. It’s more likely to flag transactions for further investigation if:
- They’re part of a series of recurring transactions with no discernible purpose
- They’re large and funded entirely in cash
- The destination country is a known haven for money laundering or tax evasion
- The destination country is subject to U.S. economic sanctions
- The outgoing transfer is for an identical amount as an incoming transfer to the same account (or is the sum of a quick series of incoming transfers)
- The recipient doesn’t have a verified bank account
Very Difficult to Reverse
It’s very rare for wire transfers to end up in the wrong recipient account, but it does happen. And when it does, it’s very difficult to recover the funds.
Unlike credit card transactions, which can be “charged back” to the purchaser, there’s no way to reverse a wire transfer. Generally, the recipient has to agree to wire the funds back to the sender. Good luck with that!
Fortunately, U.S. law provides some protections for people sending wire transfers. You have 30 minutes to cancel a wire transfer if you believe it went to the wrong recipient, the amount is incorrect, or there’s some other issue with it.
Money transfer services may be liable for their own errors, so you may be entitled to a refund if you file a complaint with the transfer service. But your recourse is limited if the error occurred on your end, like if you provided the wrong account or routing number.
Final Word
For the average person, the universe of wire transfer use cases is pretty small: buying a house, supporting relatives abroad, maybe transferring lots of cash from one investment account to another. These aren’t everyday or even every-week occurrences.
But a wire transfer is the best way to send very large amounts of money within the United States. And it’s the best way to send basically any amount of money abroad unless the recipient takes credit cards.
So if you need to send one — or even think you do — it’s important to know how they work and when they make sense.
