What Is a Wire Transfer?

Bank Wire Transfers Explained

wire transfer basics
The Balance / Miguel Co.

A wire transfer is a method of moving funds electronically. It can go between both banks and credit unions. It can also be sent either domestically or internationally.

Learn more about how wire transfers work, their safety, and when you might need one.

Definition and Examples of a Wire Transfer

A wire transfer is a way of moving money electronically between two banks. A traditional money wire goes from one bank to another using a network such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT) or Fedwire.

When you need to send or receive money quickly, a wire transfer might be the right tool for the job. Wire transfers are fast, reliable, and generally safe.

For some big transactions, a wire transfer might be your only option. This is because the funds are available to the recipient more or less right away. If you are buying a house, for example, your settlement agent may require you to use a wire transfer to pay your down payment and closing costs.

A wire transfer can mean any electronic transfer of money. But most often, if someone asks for a “bank wire,” they want a traditional, domestic bank-to-bank transfer.

U.S. consumers can also wire money to people abroad through international wire transfers, also known as remittance transfers. Credit unions and other financial services companies can act as the money transfer provider, not just banks.

Alternate names: money wire, bank wire transfer

How Wire Transfers Work

To initiate a wire transfer, you will need to contact your bank. They will ask for certain information about where the money needs to be sent. This often includes:

  • Which bank account you want the money to come from
  • Recipient's name
  • Recipient's bank account number
  • Recipient's address and/or zip code
  • Bank name where the money is being sent
  • Bank ABA routing number

If you are sending a domestic wire transfer, it often leaves your account and arrives the same day. Since you can only send funds that are in your account, the recipient's bank doesn't need to wait for them to clear. This means the money will be available to the recipient right away.

Wire transfers are a safe way to send money. Within the U.S., 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.

This lack of anonymity when banking in the U.S. makes it harder for thieves to pull off a scam with a bank wire transfer than with other payment methods. Scams are more common with personal checks or payment services like PayPal.

How Much Does a Wire Transfer Cost?

Unlike some electronic payments, bank wires cost money. The cost may range from $15 to $50 per transfer. The fee depends on:

  • The bank
  • Whether the wire is outgoing or incoming
  • Whether the wire is domestic or international
  • The transfer amount

Domestic incoming wires fall at the lower end of this price range. International outgoing wires fall are the most expensive. Some banks may waive domestic incoming wire fees for certain account types.

Some banks place a limit on the amount you can send in a single transfer or within a single day. But the limit tends to be high. Some banks allow up to $100,000 per transfer or $250,000 per day.

Pros and Cons of Wire Transfers

Pros
  • Happens quickly

  • No waiting for cleared funds

  • Safer than sending a check

Cons
  • Hard to verify recipient

  • Mortgage wire scams

  • Hard to cancel

Pros Explained

  • Happens quickly: It only takes a few minutes to set up and initiate a wire transfer. Within the U.S., transfers can often be processed on the same day, depending on how early you submit your request. International transfers take an extra day or two.
  • No waiting for cleared funds: The recipient doesn't have to wait several days for funds to clear before claiming or using the money. In other words, there is usually no bank hold placed on money received via wire transfer.
  • Safer than sending a check: A money wire poses less risk of fraud than a check because a sender must already have sufficient funds in their account to initiate a wire. In contrast, checks can bounce, and it can take several weeks (or more) to find out that a payment was bad.

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 need to complete a few tasks to finish the transfer.

Cons Explained

  • Hard to verify recipient: If you wire money to a stranger or use a business that pays out cash (such as a retail "money transfer" shop or Western Union), it is harder to verify who got the money. Someone with a fake ID could collect the cash, and it may be hard to track the recipient.
  • Mortgage wire scams: Down payments, closing costs, and other wires to a title company can be targeted by hackers. Always verify by phone where the money is supposed to be wired, especially if you get wire instructions by email.
  • Hard to cancel: Money transfer providers make it difficult for the sender to pull money back after it has been transferred. International transfers can be reversed in certain situations.

Alternatives to Wire Transfers

The term "wire transfer" is often used for various electronic transfers. In fact, most payments are electronic (even checks get digitized).

These transfers are an option when you can't or don't want to send a wire transfer. Not all of them are as instant or safe as bank wire transfers.

Money Transfer Services

Financial services companies like Western Union operate independently. You can bring cash for an in-person transfer.

How much time this type of transfer will need varies. It could take a few minutes or a few days.

On the receiving end, the business pays cash to the recipient. The recipient is identified through personal information like their name and address.

ACH Transfers

These are bank-to-bank transfers that move through the Automated Clearing House (ACH) network. ACH transfers usually take one to two days.

These transfers can be reversed, but only in limited circumstances.

P2P Payment Tools

Person-to-person (P2P) services are often easy and inexpensive to use. They include PayPal, Venmo, Zelle, and Popmoney.

Each tool has different time frames for transfers. Popmoney, for example, enables three-day standard transfers from bank accounts.

They also have different strengths and weaknesses. Users should study the options for the individual service. Which one you use may depend on whether you are making a money exchange, repayment, and another type of transfer.

Key Takeaways

  • A wire transfer is a way of moving money electronically between two banks.
  • Because the sender must have the funds in their account, wire transfers don't need time to clear before the money is available to the recipient.
  • Wire transfers can be used domestically or internationally, and they are often required for major purchases like a down payment on a house.
  • You should always verify where you are sending a wire transfer because they are hard to reverse.