When you need to send money quickly and safely, you may start to consider using a wire transfer. Wire transfers originated in the 19th century when people would use them to send money over the telegraph lines or wires, hence the name “wire transfer.” Also known as a credit transfer, today they are used to electronically transfer funds from one entity to another. They can either be initiated from a bank account, or through a cash office with cash. Here is everything you need to know about the methods, process, and reliability of using a wire transfer.
There are a few different ways to send and receive the funds involved in a wire transfer. The most common transfers are either domestic, international, or retail money transfers.
Wire exchanges that occur between two United States bank account numbers are conducted through the Fedwire system. This system is operated by the United States Federal Reserve and it enables financial institutions to transfer funds by assigning a unique routing transit number to each bank.
Wire exchanges that occur between an American bank or credit union and a foreign bank are executed through SWIFT. This stands for the Society for Worldwide Interbank Financial Telecommunication, and it provides a network that enables institutions to participate in transactions that are secured and standardized. Founded in 1974, by a group of international banks, SWIFT generates and exchanges messages that hold the data for the funds transfer. Each foreign institution is assigned a code called a Bank Identifier Code (BIC) or SWIFT Code that is generally eight characters long. By extending the code to eleven characters, the wire transfer can be sent not only to a specific bank but a particular location, office, or branch of that bank.
Retail Money Transfers
These types of exchanges use retail companies like Western Union, MoneyGram, TransferWise, and Dwolla to send or receive cash money without an account number at a financial institution. Usually, these transfers are immediately ready for pickup at any of the retail chain’s locations, and they are cheaper than the previously mentioned domestic and international wire transfers. Most of these companies keep the information about the senders and receivers for their records, and some sort of I.D. is needed to collect the funds. Other times, retail wire transfers can remain anonymous and the receiver may not be required to show identification at all.
The process of retail wire transfers requires locating a company that will conduct the transfer and filling out the appropriate paperwork. Domestic and international bank wire transfers require meeting with a banker at the initiating (sending) branch. Here are the steps:
1. First, you must have an account at the bank that will be sending the money. You will then sit down with a banker who will fill out both an electronic form and paper form to gain the IBAN and BIC codes. Make sure to have account numbers, locations, and accountholder names readily available.
2. Once the information is in, the fees should be calculated. These fees can be costly but they vary from bank to bank so most people use wire transfers to send only large funds. While the majority of banks and credit unions charge an initiation or outgoing fee, only few charge an incoming wire fee. After you and the banker sign the wire approval, your bank will send a secure message to the receiving bank using SWIFT or FedWire.
3. Although the money will immediately be withdrawn from the sending account, the funds can take anywhere from a few hours to a couple of days to show up in the receiver’s account depending on both banks and accounts. Access to those funds is also dependent on the branch.
When choosing to send money for business deals or personal means, there are many options. Most people choose wires because of their dependability, quickness, and security. The majority of wire transfers require proving the identity of the sender and receiver, but the information that is contained within the wires is transmitted through encrypted messages, keeping the information secure. Because the process involves government organizations and standards, chargebacks and errors are unlikely. Wires are also a great form of payment because banks will only initiate the wire if the sender has the funds available in the account. If you ever feel like the banker is asking too many questions, remember that it is in order to make sure that the money goes to the right account and that the reason for the wire is not fraudulent. Bankers are trained to recognize fraud for the sender’s protection because once the money is sent (domestic, international, or retail money transfers), it is nearly impossible to get it back.