Bank Wire Transfer Basics

What is a Wire Transfer and Why do you Send Money by Wire?

Moving Money
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When you need to send money fast, a wire transfer is often your best choice. Bank wire transfers are immediate, reliable, and safe (assuming you're not sending money to a thief).

For some of the most important transactions in life -- like the purchase of a home -- wire transfers are your only option. Why? It's all explained below, but the short answer is that the funds are available to the recipient more or less immediately.

What is a Wire Transfer?

A wire transfer is an electronic transfer of money. Almost all payments are electronic these days (even checks get digitized), but the term usually refers to a specific type of payment: a relatively fast and secure transfer from one bank or credit union to another using a network such as SWIFT or Fedwire. If a payment takes several days to clear, it’s not a traditional wire transfer.

Bank Wire Transfer Safety

How safe are wire transfers? Funds go from one bank to another, and then to the recipient’s account. Inside of the United States at least, that means each party to a wire transfer needs a bank account. To open an account, federal regulations require that banks verify your identity (among other things) and ask for a physical address where you can be found.

It is virtually impossible to bank anonymously within the US, which limits thieves' ability to pull off a scam with a bank wire transfer.

You can keep your identity from individuals and businesses to some degree, but law enforcement generally has the ability to find you.

That said, scams involving wire transfers are not unheard of. The main risk is that you send money, the thief withdraws cash (or wires it to a different account, possibly overseas), and you don't realize you've been scammed until it's too late to recover the funds.

If somebody asks you to wire funds, think carefully about who you're sending to. Some transactions are especially risky: for example, if you wire money to an office that pays out the proceeds in cash (such as a retail "money transfer" shop in a strip-mall, Western Union, or similar), it is harder to verify who got the money. A fake ID might be used to collect cash.

Again, the main risk is when you send money.

What about receiving a wire transfer -- is that safe? For the most part, yes; payments are more certain because banks only wire money out if the sender has the funds available. Once the money arrives, it should be yours for the taking within one business day (although exceptions may apply). What's more, it is very difficult for the sender to pull money back after it's been transferred.

However, you’ll want to make sure that a real wire transfer was completed (talk with your bank to find out if the funds have “cleared,” or if you need to wait). Some electronic payments can be reversed, and thieves like to take advantage of your confusion – by promising to send a wire transfer but actually sending money using a different (reversible) method, for example.

Speed of Wire Transfers

Wire transfers are fast. Because of the certainty mentioned above, transferred funds are considered ‘cleared’ immediately when received.

In most cases there is no hold on the funds, so the recipient can use that money within one business day. Sometimes it takes a while for the receiving bank to show the wire proceeds in the recipient’s account, but the money is there – an employee typically just needs to flip a few switches. You can generally hunt a wire down with a few phone calls if you're in a hurry to spend the money.

Reliability

The bank wire transfer system is reliable. It has to be robust because it is used for so many important (and large) transactions. As a result, there are redundancies built in to reduce the impact of failures or disasters.

How to do a Bank Wire Transfer

To wire money, just submit instructions to your bank. You’ll need to provide information about the recipient’s bank account, and you often have to use a special form provided by your bank (some banks let you do all of this online, while others require a signed form). For more details, see How to do a Bank Wire. Plan on paying a modest fee ($40 or so is common).

To receive money by wire, you’ll need to provide your bank account information to the person or business sending money. Ask your bank for “incoming wire instructions” to be sure you use the correct numbers. Again, the money generally moves in one day, but it might take an extra day for the funds to appear in your account (unless you call and have the process expedited, which might or might not be possible). Some banks charge a modest fee to receive wires, but some don’t.

Other Types of Electronic Transfers

The term wire transfer sometimes gets used for other types of electronic transfers. Those transfers are generally not as instant or safe as the transfers described above. For example, Western Union money transfers are sometimes called “wires” and some of those transfers are more or less instant (if you pay with cash and both parties go to a Western Union office). However, if you fund a Western Union transfer from your bank account, the process will take at least several days.

ACH transfers are also different. The money moves from bank to bank, but the transfer takes several days, and the payee won’t know for sure if the funds will arrive. What’s more, ACH can only be used for transfers within the United States, while wire transfers can be used globally.

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