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Wire Transfers Explained

Banking, Banking Basics, Money Transfer
what is a wire transfer

Sometimes you need to send money somewhere fast.

Wire transfers are one of the most effective and quickest ways to move money for things like closing on a home or sending funds to relatives abroad. They cost a bit more and take more effort than other methods of sending money, but you’ll have peace of mind.

Here’s what you need to know.

» MORE: Best ways to send money to individuals

What is a wire transfer?

A wire transfer is a fast way to move money electronically from one person to another using a bank or a nonbank provider such as Western Union or TransferWise. No physical money moves between locations. The term “wire transfer” comes from an era when banks relied on telegraph wires for this type of money transfer.

A bank wire consists of instructions about who will get the money, including the bank account number and how much the recipient should get. Nonbank wire transfers might not require a bank account, depending on the service, but they will require the recipient’s name, the transfer amount and the destination. You pay the amount upfront, so the transfer is final once processed.

Types of wires

There are two main types of wire transfers: domestic and international. The cost and delivery time vary for each. If you’re sending money overseas through your bank, you’ll generally use a wire transfer. Banks can wire amounts in the tens of thousands of dollars and send money in a foreign currency.

» MORE: Best ways to wire money internationally

How long does it take?

Your money doesn’t go straight from one bank or provider to another. A real-time wire processing system like FedWire clears the payments, similar to the way the Automated Clearing House processes ACH transfers like direct deposits and bill payments. For domestic wire transfers, money generally gets processed the same day the wire goes out — usually within a few hours. International transfers, which involve a U.S. clearinghouse and at least one foreign country’s processing system, take several days.

What does it cost?

A wire transfer can be one of the more expensive ways to send money, especially through banks. On average, there’s a flat fee of around $25 to wire money to another person in the U.S. and about $43 to wire abroad, based on some of the bigger U.S. financial institutions’ current pricing. Recipients might also have to pay their bank, usually around $8 to $10, to receive the money.

International wire transfers have another cost, which can be hidden. Banks both in the U.S. and abroad charge consumers higher exchange rates than what they charge other banks.

» MORE: What wire transfers cost at banks

For transfers through nonbank providers, the fee can depend on the provider, amount, destination, delivery and payment options, and method of sending money, such as online or in person. Generally, you’ll get a better exchange rate than you would at a bank.

For domestic transfers that are less urgent or involve a smaller amount, ACH transfers, such as external funds transfers, are better. Deliveries can take several days, but they cost a few bucks at most.

How safe is it?

A wire transfer is secure and can’t be canceled once it’s been sent, so make sure you know the person you’re sending money to. Scam artists might say you won a lottery or sweepstakes you never signed up for and then ask you to wire money to pay supposed fees. If you fall for a trick like this, you can’t get your money back. The one exception is if you make an international transfer and then cancel it within a half-hour, assuming the wire hasn’t been picked up or deposited yet. This is one of several federal protections you have when sending international money transfers.

A wire transfer isn’t the type of money service you’ll need often, but when speed is crucial, it can be a lifesaver.

Spencer Tierney is a staff writer at NerdWallet, a personal finance website. Email: spencer@nerdwallet.com. Twitter: @SpencerNerd.

Updated Nov. 29, 2016.



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