Wire transfers refer to electronic transfer of funds between two entities that may or may not be banks. These transfers do not involve the actual movement of physical money between two locations. The term “wire transfer” has remained from the time when financial institutions relied on telegraph wires to carry out transfer instructions.
While traditional bank wire transfers require that senders and recipients have bank accounts, you may now initiate a wire transfer in person by paying cash, and the recipient may then collect cash from a physical location.
International Money Transfers
A majority of all international money transfers rely on Society for Worldwide Interbank Financial Telecommunications (SWIFT). The SWIFT system gives banks a secure way to communicate with each other, which they use to exchange information surrounding transfer of funds. Banks are given unique codes, referred to as Bank Identifier Codes (BICs) or SWIFT codes. With the help of these codes, payments are directed to specific branches.
Some of the other systems used for carrying out cross-border fund transfers include BACS, Clearing House Automated Payment System (CHAPS), Fedwire, Target2, and Faster Payment Services (FPS).
How Long Do They Take?
A wire transfer does not actually send money from one location to another. A payment is cleared through a real-time wire processing system such as Fedwire. With domestic transfers, the wire typically goes out in few hours and the payment is usually processed on the same day. Cross-border wire transfer payments that rely on international processing systems, on the other hand, may take several days.
How Much Do They Cost?
Carrying out a wire transfer through a bank is not the most cost effective way to send money overseas. In the U.S., the average cost of carrying out a domestic wire transfer is around $25, and increases to $43 for sending money overseas. Depending on where the recipient lives, the receiving bank may also charge a fee to process the transfer.
A hidden cost you have to worry about when using the services of banks comes in the form of an exchange rate markup. When sending money overseas, you might be better off turning to specialist money transfer companies such as TransferWise, OFX, or WorldFirst, as they provide bank-beating rates consistently.
Carrying out an international wire transfer is no longer as expensive or time consuming as it was until a few years ago, thanks to the arrival of several specialist money transfer companies. Now, you may initiate a transfer from practically anywhere and at any time, and the recipient may collect the money from a physical location or receive it directly into a bank account. Given the number of options from which to get to choose, it is important that you compare them well.