7 things you must know before you do wire transfer

Wire-Transfer-demystified

7 things you must know before you do wire transfer

If someone is asking you for a wire transfer or just wondering what wire transfer is here are 7 things you must know before you do wire transfers.

1. What is wire transfer

Wire transfer is a way of transferring money electronically. Wire transfers were started by Western Union in 1872 and used telegraph wired network hence the term wire transfer (though it was known as Telegraph transfer). Even though wire transfers are generally conducted between financial institutions (let’s refer them as bank in this article for simplicity) neither sender nor receiver is required to have bank account. Having bank account improves customer experience and speed of transaction.

2. How does wire transfer work

In essence wire transfer is a simple process.Wire transfer process

  • Sender submits the wire transfer instruction to the bank with details of an individual or organization funding the transfer, bank details to fund the transfer from, recipient and financial institution details where funds will be withdrawn from. More details on this later.
  • The sending bank sends a secure message with settlement instructions to the recipient bank.
  • The recipient bank verifies identity of the beneficiary and release funds.

3. What information is needed for wire transfer?

At minimum following information is needed,

  • Sender name and address
  • Source of funding – account number, cash etc.
  • Beneficiary name and address
  • Amount
  • Purpose of transfer

Generally bank routing number and beneficiary account number is sufficient for domestic wire but international wire requires following additional detail,

  • Internationally recognizable bank account number such as IBAN (International Bank Account Number) or CLABE (Clave Bancaria Estandarizada, i.e. Standardized bank code for Mexican banks)
  • Recipient bank SWIFT/BIC or IFSC or IRC code depending on recipient country
  • Currency funds will be withdrawn in

Please note that information you provide about sender and receiver may be used for identifying and preventing illegal activity such as money laundering, terrorist funding etc.

Lookup swift codes with Transferwise here.

Lookup IFSC codes here.

4. How much does the wire transfer cost

It is important to know that both sender and receiver pays for the wire transfer.

  • Sending wire cost between $30 and $45
  • Receiving wire cost between $10 and $15. In some cases this fee could be waived by beneficiary financial institution.

In addition you’ll be charged by credit card company if you are using credit card for wire transfer. If wiring international and beneficiary is expected to receive funds in local currency you must consider exchange rate offer by the bank. Before you wire check current exchange rates on https://exchangerateiq.com to ensure your financial institution is providing comparable or better exchange rate.

5. Is it safe to wire money?

is wire transfer safe

Yes, wire transfers are safe. Banks are required to use secured communication channel for transfer. Wire transfer guarantees fund will be delivered to beneficiary but verifying if beneficiary is legit or a thug is your responsibility.

 

6. How fast is wire transfer?

  • Domestic wire transfers take few hours.
  • International wire transfers take a day or two.

Even though domestic wire transfer in same bank is instantaneous it should be used for high value transfer only. Account to account transfers without wire transfer are available free of charge at most banks with same security and speed.

7. Can wire transfer be reversed?

It is technically possible to reverse wire transfer as long as recipient bank has not released funds to the beneficiary. But wire transfer being electronic it is only possible if sender identifies the error and request banks to reverse transfer immediately. It is wise to double or triple check your wire transfer instructions for accuracy before submitting.

 

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