Wire Transfers: Frequently Asked Questions & Answers
Wire Transfers: Frequently Asked Questions & Answers
- What is a wire transfer?
- How does a wire transfer work?
- Wire transfer fees
- How long do wire transfers take?
- Wire vs. ACH
- How do I send a wire transfer?
In today’s fast-paced world, businesses are very nearly overwhelmed by the barrage of tasks and responsibilities they face on a daily basis. Simply put: in modern times, every single second counts. Especially when it comes to payments. Whether you need to get a vendor paid as quickly as possible or just want a quick, time-saving method for handling a lingering invoice, there’s a convenient payment method available: the wire transfer. Depending on what type of wire transfer you use, your recipient can have money-in-hand securely and quickly.
To help you better understand the oft times complex world of wire transfers, we’ve put together this comprehensive FAQ guide to wire transfers. We’ll walk you through a basic understanding of what a wire transfer is, how wire transfers work, the fees associated with both domestic wire transfers and international wire transfers, the difference between an ACH and a wire transfer, and finally, what steps you need to take to initiate and track a wire transfer.
What is a wire transfer?
In a wire transfer, funds are passed through a network of banks and transfer services either domestically or internationally. Typically wire transfers have high cap limits, so are often used to transfer large sums of money. When making a wire transfer there is no exchange of actual cash, all funds are transferred electronically.
Wire transfers can be either domestic–any wire transfer that takes place between two financial institutions in the same country–or international–wire transfers that are initiated in one country but resolved in a different country.
Let’s look at how exactly a bank wire transfer works.
How does a bank wire transfer work?
Wire transfers are typically initiated between one bank–or a similar reputable financial institution–and another. The sender initiates the wire transfer by paying for the transaction at the bank (or similar financial institution) of their choice.
Instead of transferring actual cash (like when transferring funds via a money transfer) a sender who is using a wire transfer passes along the receiving party’s information. The sender needs the receiver’s basic information (name, address, contact number, etc.), bank account and branch, the receiving financial institution’s information, the reason for the transfer and the amount they’d like to send via wire transfer.
When all of the information has been entered into the respective system of the bank (or financial institution), the wire transfer is then initiated. The sender’s financial institution passes along all of the required information through a secure wire transfer service. Once the recipient’s bank of choice has received the information, it will then deposit its own funds into the recipient’s bank account before settling the payment with the sending institution.
And that’s how a wire transfer works.
Sadly, wire transfers aren’t free. So what are wire transfer fees for domestic wire transfers and international wire transfers?
What are wire transfer fees? Are they different for domestic wire transfers and international wire transfers?
Bank wire transfers–a commonly used method of making wire transfers–can be costly with wire transfer fees changing based on whether someone is making a domestic wire transfer or an international wire transfer. Many banks also charge wire transfer fees for both sending wire transfers and receiving wire transfers on top of a handful of other price-raising fees for things like converting your money into different currencies. Also, if an intermediary bank is needed in the wire transfer process an additional wire transfer fee can, and usually is, added to the existing charge.
Again, the wire transfer fees associated with sending and receiving wire transfers differs between domestic wire transfers and international wire transfers and can be markedly different between varying banks and financial institutions.
For domestic wire transfers, the median wire transfer fee within the United States is $25 dollars. Some banks charge an additional wire transfer fee of $15 dollars for receiving the domestic wire transfer.
International wire transfers cost more on most occasions. The median wire transfer fee for receiving an international wire transfer is $49 dollars. With, again, some financial institutions tacking on an additional $15 dollar wire transfer fee for receiving the international wire transfer.
Frankly put: sending and receiving domestic and international wire transfers can quickly become expensive. There are non-bank providers that charge fewer and smaller wire transfer fees for domestic wire transfers as well as a handful of strategies to help cut down your wire transfer fees. If you are making an international wire transfer keep your eyes peeled for those companies that offer the best exchange rates.
As important as it is to know the wire transfer fees associated with sending money through a domestic or international wire transfer, there is perhaps an even more important question: How long do wire transfers take?
Let us walk you through it.
How long do wire transfers take?
The benefit of sending cash electronically through a domestic or international wire transfer is convenience and, more so, speed. The time it takes to send a domestic wire transfer within the United States is generally assumed to be completed in three days. That said, the time to make a domestic wire transfer can be under 24-hours if the wire transfer is between two accounts at the same bank or financial institution.
International wire transfers can take a relatively longer period of time. Depending on the bank or financial institution, the time to send international wire transfers can be up to five days. Though, some banks do allow online international wire transfers which are sent and received in minutes.
If you need your domestic wire transfer or international wire transfer to show up at a specific time (i.e. as soon as possible), contact your bank and ask about ways to expedite the process. Though an additional wire transfer fee may be added, it may allow your funds to arrive quicker than previously expected.
What is the difference between ACH vs. wire transfers?
The difference between ACH (automated clearing house) transfers vs. wire transfers are small, but important to note. Both ACH transfers and wire transfers are secure, relatively fast ways to electronically send money though there are differences in the cost, speed and security between them. ACH transfers are commonly used for recurring payments–employee wages, bills, etc.–while wire transfers are used to make a variety of payments quickly.
The main difference between ACH vs. wire transfer is that ACH transfers are made through an electronic network (the Automated Clearing House) that allows funds to be transferred between upwards of 25,000 banks and financial institutions. The ACH transfer information is sent piecemeal through the ACH and after it clears, payments are sent to recipient bank accounts. Wire transfers on the other hand don’t use an ACH because the bank acts as the middleman, sending funds electronically between accounts.
In terms of the cost between ACH vs. wire transfers, ACH transfers are notably cheaper. ACH transfers are usually free for the recipient, and the sender will likely only receive a transfer fee of $1 per payment. Sending domestic and international wire transfers can cost anywhere from $35 and up for the sender, and receiving a domestic or international wire transfer is usually free, but wire transfer fees are common. Using services like Plastiq to pay for ACH or wire transfers via credit card can lower costs.
The speed of sending ACH vs. wire transfers also can differ. Wire transfers–without any unexpected procedural issues–can be deposited and withdrawn within the same day, with international wire transfers often taking longer. ACH transfers usually take between two and three business days though banks are now working to match the speed of wire transfers, with some ACH transfers now taking less than 24-hours.
Security can also be a difference when it comes to ACH vs. wire transfers. ACH transfers are safer for senders because in case of error or fraud, they can be reversed. Wire transfers are better for the recipient as the bank treats them like cleared funds so they can be withdrawn immediately, but this disallows any sort of reversal on the sender’s end. Domestic and international wire transfers can’t be faked either. And though a wire transfer’s security is greater than an ACH, the lack of being able to reverse the transfer means the sender needs to be certain of the recipient’s information before sending.
When it comes to ACH vs. wire transfer both get the same job done–sending funds electronically–but both come with their own pros and cons.
What are the benefits of wire transfers?
As stated above, domestic and international wire transfers are much faster than sending paper checks and the recipient of the wire transfer can withdraw and use the funds immediately.
Beyond that, domestic and international wire transfers are incredibly reliable and secure ways to send cash quickly. Greater security is achieved by the sender being required to confirm all of the recipient’s banking details–routing number, account number, etc.–through either one-on-one phone call with a representative of the sender’s financial institution or through a secured form online. And though there are concerns about wire transfer scams, a dependable bank or financial institution will be on the look out for anything suspicious. If there is something suspicious about the wire transfer, the financial institution will work with the sender or recipient to ensure the security and credibility of the transfer.
How do I send a wire transfer?
- The sender submits instructions to their bank or financial institution–including the recipient’s bank account details. This information can be given to your bank in person or via a form online.
- When the sender has paid for the wire transfer (and any accompanying wire transfer fees) the funds will be submitted in the recipient’s bank account.
- Upon deposit, the banking institutions will settle the payment.
- The recipient will then have immediate access to the funds sent through the domestic wire transfer or international wire transfer.
Nowadays there are services like Plastiq that allow you to quickly and seamlessly pay for wire transfers via your credit card. Though wire transfer fees will still be charged, services like Plastiq Pay commonly charge less wire transfer fees.
We hope this definitive wire transfer guide has helped you better understand the benefits of sending domestic and international wire transfers, wire transfer fees, the time it takes to send wire transfers and the difference between ACH vs. wire transfers. Reach out to one of our team members to find out how Plastiq lets you pay for your wire transfers using your credit card.