How Wire Transfers Work: Sending and Receiving Money

The Process, Costs, Security, and Speed of Wiring Money

wire transfer basics
Image by Miguel Co. © The Balance 2019

When you need to send or receive money quickly, a bank transfer or a wire transfer might be the right tool for the job. Wire transfers are immediate, reliable, and safe (as long as you're not sending money to a thief).

For significant transactions—like buying a home—wire transfers or cashier’s checks might be your only options. Why? 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. A traditional wire transfer goes from one bank or credit union to another using a network such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT) or Fedwire.

Usually, if somebody asks for a “bank wire,” they want the traditional bank-to-bank transfer. But the term wire transfer gets used for other types of transfers as well, so it's best to clarify the requirements if somebody asks for a wire transfer.

Speed of Wire Transfers

Wire transfers are useful because the money moves within one or two days. Within the United States, same-day transfers are possible, and international transfers take an extra day or two.

Cleared Funds 

Because the money moves quickly, the recipient should not have to wait for funds to clear before claiming or using the money. In other words, there is usually no hold placed on money received via wire transfer. For anybody selling merchandise or services, a wire transfer is safer than a check. Checks can bounce, and it can take several weeks (or more) to find out that a payment was bad.

Processing Time

Wires can be completed in one day, depending on how early you submit your request to send money. It may take several hours for the receiving bank to show the wire proceeds in the recipient’s account—even if the money is at that bank. A bank employee may just need to complete several tasks to make the funds available.

How to Use a Wire Transfer

To wire money, just submit instructions to your bank. You’ll need to provide information about the recipient’s bank account, which you may need to request from the recipient—ask for wire instructions. To make the request with your bank, you may need to use a bank-provided form, but some banks let you complete the process online.

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 typically moves in one day, but it might take an extra day for the funds to appear in your account balance online (unless you call to have the process expedited, which might or might not be possible).

Fees are often lower to receive a wire transfer ($0–$18) than to send one ($30 and up), and foreign transfers are more costly than domestic ones. But if you use your credit card to fund a wire transfer, you’ll pay cash advance fees, a higher interest rate, and fees for the transfer itself. It’s best to send a wire directly from your checking account.

Bank Wire Transfer Safety

The main risk with wire transfers is when you send money.

With a wire transfer, money goes from one bank to another, and then to the recipient’s account. Inside of the United States, 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 difficult to bank anonymously within the U.S., 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. Even Swiss banks cooperate with U.S. law enforcement efforts.

Watch out for scams involving wire transfers: 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. Thieves only need to take control of somebody's bank account for a few days to get cash or send the money elsewhere. Because of this, don't ever send money to anyone you don't know.

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. Anybody with a fake ID can collect the cash.

Home Loans

Down payments and other wires to a title company are an attractive target for hackers. When buying a home, always verify where the money is supposed to be wired—especially if you get wire instructions by email. Hackers can alter emails (even from people you've been working with for several weeks) and instruct you to send money to the wrong place. To avoid problems, call the recipient to verify the wire instructions.

Receiving Funds

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 need to make sure you received a real wire transfer. To do so, speak with somebody at your bank to find out if the funds have “cleared,” and discuss any concerns you have about the transaction. Some electronic payments can be reversed. Thieves like to take advantage of your confusion by promising to send a wire transfer but actually sending money using a different (reversible) method.

Other Types of Electronic Transfers

The term wire transfer is often used for various types of electronic transfers. Those payments are typically not as instant or as safe as bank wire transfers, as described above. In fact, almost all payments are electronic these days (even checks get digitized).

Money Transfer Services

Western Union money transfers and MoneyGram are sometimes called “wires,” and some of those transfers are more or less instant. The sender can walk into a retail location with cash, and the recipient can walk out of another outlet with money in just a few minutes. However, if you fund those transfers from your bank account, the process will take at least several days. And if you use your credit card for a money transfer, you’ll pay extra fees.

ACH Transfers

Automated clearing house (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. ACH payments can be reversed, but only in limited circumstances.

Apps and P2P Payment Tools

Several payment tools allow you to send money by tapping into your bank account indirectly. Venmo, PayPal, Square Cash, and others complete electronic transfers for you. Be sure to check with those service providers on any risks you might be taking (especially if you pay somebody you don’t know). These services are typically easy and inexpensive. But each tool has strengths and weaknesses, so learn about the options and find out what works best for anybody you’re exchanging money with.

Article Sources

  1. Wells Fargo. "The Ins and Outs of Wire Transfers." Accessed March 5, 2020.

  2. U.S. Department of Treasury's Financial Crimes Enforcement Network. "Appendix D - Fundamentals of the Funds Transfer Process," Pages 58-63. Accessed March 5, 2020.

  3. Consumer Financial Protection Bureau. "What Is a Wire Transfer?" Accessed March 5, 2020.

  4. Wells Fargo. "Safety Tips for Wire Transfers." Accessed March 5, 2020.

  5. Chase Bank. "Wire Transfers From Chase." Accessed March 5, 2020.

  6. Wells Fargo. "Wire Transfer Quick Reference Guide for Customers." Accessed March 5, 2020.

  7. Western Union. "This Is the Fee Table." Accessed March 5, 2020.

  8. American Express. "7 Answers Every CFO Should Know About Wire Transfers." Accessed March 5, 2020.

  9. Federal Deposit Insurance Corporation. "Rules for Banks." Accessed March 5, 2020.

  10. Federal Trade Commission. "Using Money Transfer Services." Accessed March 5, 2020.

  11. Consumer Financial Protection Bureau. "Can I Cancel a Money Transfer?" Accessed March 5, 2020.

  12. Consumer Financial Protection Bureau. "Are There Any Laws That Protect Me If I Send Money to Someone in Another Country?" Accessed March 5, 2020.

  13. Western Union. "Frequently Asked Questions." Accessed March 5, 2020.

  14. Wells Fargo. "Six Things You May Not Know About the ACH Network." Accessed March 5, 2020.