They don’t advertise like they used to, but you may remember commercials from your younger days from Western Union. The stranded youth calling home for some cash, while outside it’s pouring down rain upon a curbed Toyota.
The young person gets the cash from his parents to pay a mechanic through a wire transfer provided by Western Union. But Western Union began long before those old commercials; in fact, they were wiring money thirty years before the twentieth century. As far back as the 1870s, banks were already transferring $2.5 million per year using wire transfers.
These days, we still use the same nomenclature, but a wire transfer simply refers to the moving of funds from one person to another without the need of a third-party processing system.
The funds can be transferred electronically from one bank account to another, or the recipient can receive cash at designated locations. So 145 years later, wire transfers are as prevalent as they were in the days of cowboys and budding railways. They are no more antiquated than they were in the 19th century.
People and companies frequently wire money every day when time is of the essence. If you’re thinking about wiring money but are unaware of the details involved, then read on to learn more.
Table of Contents
- 1 When should you use a wire transfer?
- 2 How to Do a Wire Transfer
- 3 Wire Transfer Fees
- 4 How fast is a wire transfer?
- 5 Can you reverse a bank wire transfer?
- 6 Are wire transfers safe?
- 7 Are there limits to how much I can transfer each day, week, or month?
- 8 What is the difference between a wire transfer and an ACH transfer?
When should you use a wire transfer?
There are many examples of when you may need to wire money from one location to another. Basically, wire transfers are best used when time is limited. They’re for when you really need to transfer money and the clock is ticking. Common examples include:
- Sending money to family (either abroad or far away)
- If you need to send a large amount of money for payment purposes (like closing on a house)
- Anytime large amounts of funds need to be verified
Unlike checks, which can bounce, funds for a wire are verified to exist before they are sent. You can’t wire money you don’t have. Anyone can write a check (because as they say, paper doesn’t refuse ink), but only people who actually have money can wire it. For this reason, large transfers of cash are usually done via a wire.
How to Do a Wire Transfer
Once you’ve decided to complete a wire transfer, there are just a few easy steps to take. First, get in touch with the recipient of the wire transfer to get a few pieces of vital information. At a minimum, you’ll need their:
- Name and address (make sure you use the name of the actual account holder)
- Bank or credit union name, address, and ABA number
- Recipient’s bank account number
- Routing number for international wire transfers
Remember that all of this information should be about your recipient, not you! Once you’ve gathered all of this, you need to go in person to your bank branch. If you have multiple banks, pick the one with the account you plan on using.
From there you can initiate the wire transfer with a teller. You’ll need to have the funds to cover the cost of the transfer, which you can either bring with you or, in most cases, pay from your account.
Wire Transfer Fees
It depends on what bank you’re sending or receiving from. It also depends on whether it’s an incoming or outgoing wire, and whether or not it’s a domestic or international wire. The rates vary depending on which banks are involved. Where many banks won’t charge anything, others may charge as much $50, so definitely find out what fees are involved before you agree to transfer funds.
The following ranges were obtained from reviewing the top 24 U.S. banks:
- Incoming domestic wire: $0- $20
- Outgoing domestic wire: $14- $40
- Incoming international wire: $0-$30
- Outgoing international wire: $20-$65
Domestic vs. International Wiring Fees
You probably noticed that wiring domestically is a lot cheaper than wiring internationally. Should you wire domestically, it’s faster because fewer parties are involved. Wire internationally involves not only dealing with more banks, but also two different wire processing systems; that’s the reason there are greater fees.
Also, don’t forget that all currencies aren’t created equally. Your U.S. dollar may be worth more or less than the currency you’re exchanging with. Plus if you’re sending internationally, whatever foreign bank you’re sending money to may have a marked-up rate.
There are two more things to consider. How you transfer money can also affect what fees you may incur. Wiring online will typically be a lot cheaper than going the brick and mortar route or calling on the phone. There’s really no hard reason for this, and it can only be assumed that you’re paying for customer service.
Additionally, if you plan on wiring money to the same person or entity multiple times, some banks will charge less. However, if this is the case, wiring money may not be the best option for you because of all the fees involved.
Don’t forget, wiring money is utilized when you need to move money fast. If you know beforehand that money will be coming or going, an ACH transfer may be best. As you’ve learned, lots of fees are involved with wiring.
How fast is a wire transfer?
If your money is staying in the country, but just switching hands, the process is pretty fast. Because you’ll only be using one wire processing system, and the money won’t have to be converted, you should expect to get your money in just a few hours.
However, if you’re wiring money internationally, it can take as long as a few days. This is because your money will have to go through another country’s processing system, as well as the U.S. system.
Think of your money like a package being delivered. If you had a package you just wanted to send across the state, it’s no big deal. You take it to your post office, they inspect it, and then ship it to whomever you are sending it to.
On the other hand, if you want to send your package to Germany, then not only does the U.S. post office have to inspect it before shipping your package, but Germany’s postal system also needs to inspect it upon receiving it.
You wouldn’t think moving money would be as complicated as actually moving a physical item, but in many ways, it’s much more so. The transfer of money is taken more seriously than anything else in this world.
Can you reverse a bank wire transfer?
Typically, no. Once the wire has been sent, the transaction is final. If for whatever reason the wire has not been sent, then it is possible to rescind the payment or transfer. Know that this is unlikely to happen in today’s age, especially if we’re talking about a domestic transfer in which only one processing system is used.
The odds are higher if you need to stop a transfer between two countries, but even then it’s unlikely. If you’re going to wire money, you need to be positive about who the recipient is, and the reason you’re sending it. If the situation is murky in any way, then a wire transfer may not be the best bet. Once you’ve sent the money, it’s gone.
Are wire transfers safe?
There aren’t really any risks in sending a wire transfer itself, but there are scams associated with them. If you’ve looked at your spam email folder lately, you may have gotten an email from someone claiming you’ve won a prize. They tell you to wire just a few bucks to them and they’ll send you a new iPhone.
You probably have 5-10 messages with something very similar to the above hoax in your inbox right now. Often these scams come from swindlers living in other countries who hit up thousands of people in the hopes that three or four people will fall for it.
If you fall for the scam and wire the money, there’s nothing you can really do because, if you remember, all wires are final. Another way they do it is by asking for your banking information so they can wire money to you. Hopefully, you don’t need to be told that all sorts of mischief can be had with a person’s bank information. Don’t fall for that one either.
Is there any risk of your wire being intercepted or delivered to the wrong person? No. If you’re doing a bank-to-bank transfer, you’ll need the recipient’s bank information (ABA and account number), plus his or her full name.
If you’re transferring physical cash, then the recipient will need to provide a physical ID along with a verification code to receive the money. Though not impossible, these requirements are difficult to maneuver around if you’re a thief. All in all, wiring money is safe, just look out for email scams.
Are there limits to how much I can transfer each day, week, or month?
The answer depends on your bank. Some banks have limits while others don’t. It’s safe to say that if you’re a member of a larger national bank, then you’re safe to wire and receive as much money as you want. However, if you’re frequently wiring out or receiving large amounts of money via a wire, your account may come under review, but even then the chances are low.
Once in a while, funds may be frozen to ensure illegal money is not flowing in or out of the country. But as long as you’re not a part of anything shady, there’s nothing to worry about. This only happens in extreme cases where hundreds of thousands of dollars are frequently wired on a daily basis. If you’re reading this article and learning about wire transfers for the first time, then you’re probably safe.
What is the difference between a wire transfer and an ACH transfer?
ACH stands for Automated Clearing House. Generally speaking, whenever an electronic transfer of funds takes place, it’s an ACH transfer. If you have automatic deposit or pay your bills online, you’re using ACH.
ACH transfers differ from wire transfers because they’re not direct bank-to-bank transfers. When you schedule a payment, the information is sent, instead, to a clearinghouse. Your transaction is put into a batch, along with thousands of others, and the batch is then sent to the appropriate bank.
Why do they do this? Think of it this way. Imagine a friend sent you twenty pictures over the weekend of him at a concert. You want to look at them full screen, but you have to download them each individually first before you do. It would be much easier to download them all at the same time as a zip file instead. This, in essence, is what banks do with “batches.”
Batches save banks a lot of time because all of the transactions are dealt with at once. As you wouldn’t want to download each picture individually, banks don’t want to deal with one transaction at a time.
ACH Pros and Cons
Because of the ease of ACH transfers, they are either free or very low-cost (as opposed to wire transfers where there can be costly fees on both sides of the transaction). Wire transfers are very fast, but ACH transfers can take a day or more. Another drawback to using an ACH is that you typically can’t send money internationally through them.
If you have a family member abroad standing in the rain with no options before her or him, then a wire transfer is your better choice. Though ACHs take longer to deliver money, they’re basically free compared to wire transfers. As you can see, though, both have their uses in today’s world.