What is a 'Wire Transfer'

A wire transfer is an electronic transfer of funds across a network administered by hundreds of banks around the world. Wire transfers allow for the individualized sending of funds from single individuals or entities to other individuals or entities while still maintaining the efficiencies associated with the fast and secure movement of money. Wire transfers allow people in different geographic locations to safely transfer money to locales and financial institutions around the globe.

BREAKING DOWN 'Wire Transfer'

A wire transfer is used to transfer funds from one bank or financial institution to another. These transfers are considered remittance transfers under U.S. law. However, since the inception of wire transfers, the term has also come to represent any electronic transfer of money from one person to another.

No physical money is transferred between banks or financial institutions when conducting a wire transfer. Instead, information is passed between banking institutions regarding who the recipient is, what his bank account number is and how much money he is receiving. Nonbank wire transfers sometimes do not require bank account numbers.

The sender of a wire transfer first pays for the transaction up front at his bank. The recipient's bank receives all the necessary information from the initiating bank and deposits its own reserve funds into the correct account. The two banking institutions then settle the payment on the back end, after the money has been deposited. This is why no physical transfer is made during a wire transfer.

Types of Wire Transfers and Associated Costs

All legitimate wire transfers take two days or less to process, on average. If an electronic form of payment takes longer than a few days, it is not a true wire transfer. A domestic wire transfer is processed on the same day when it is initiated and can be received within a few hours. International wire transfers can be expected to be delivered within two business days.

The reason for the two different lead times comes from the use of domestic Automated Clearing Houses (ACH) and foreign processing systems. A domestic wire transfer only has to go through a domestic ACH and can be delivered within a day. International wire transfers must clear a domestic ACH and also its foreign equivalent, adding a day to the process.

Wire transfers cost money to initiate, regardless of whether they are domestic or international transfers. Some providers of domestic wire transfers charge as little as $25 per transaction, but the fee can be as high as $35 or more. International wire transfers sometimes have a higher fee; it's possible to pay upward of $45 to initiate an international wire transfer.

RELATED TERMS
  1. Bank Wire

    A bank wire is an electronic message system, which allows major ...
  2. Current Transfers

    Current transfers are current account transaction in which a ...
  3. Transfer Procedures

    Transfer procedures are the means by which ownership of a stock ...
  4. Wire Fate Item

    Wire fate item refers to a request by a bank when it sends a ...
  5. Balance Transfer Fee

    A balance transfer fee is an expense charged in return for the ...
  6. Correspondent Bank

    A correspondent bank is a financial institution that is authorized ...
Related Articles
  1. Personal Finance

    8 Low-Cost Ways To Transfer Money

    If cost is your primary concern, there are several cheap(er) ways to move funds.
  2. Investing

    5 Money Transfer Tips For Foreign Workers

    If you are working in the U.S. as a foreign worker, here are some tips for sending money back home.
  3. Small Business

    Moneygram vs. PayPal vs. Xoom: Who Has the Lowest Fees?

    Learn about the different fees associated with leading transfer services PayPal, MoneyGram, and Xoom and the types of services that each company provides.
  4. Trading

    IBM Launches Stellar-backed 'Blockchain World Wire' Payments System

    Eliminating the time-consuming, high-cost, present-day banking intermediaries, World Wire expects to streamline cross-border payments
  5. Tech

    The World Will Soon Use Bitcoin to Send Money Home

    New players are constantly challenging the dominant, conventional mechanism of payment transfers that existed before bitcoin and blockchain arrived.
  6. Managing Wealth

    Review: Discover Checking Account

    Will having a Discover checking account save you money? It will save you fees.
  7. Personal Finance

    Sending Money: MoneyGram vs. Western Union (WU, MGI)

    Comparing the differences between the services – and the fees.
  8. IPF - Banking

    These Savings Accounts Have the Highest Interest Rates

    Don't expect interest from a bank savings account to make you rich. You can do better, however, than the paltry 0.08% average paid in 2015.
  9. Retirement

    What is the Great Wealth Transfer?

    As Baby Boomers age, it's inevitable that their assets will get passed on. Over the next 20 years, there will be a transfer of wealth that surpasses $30 trillion.
  10. Personal Finance

    What to Know About Transferable Points Programs

    Transferable points programs give credit card users a more extensive way to use credit card points for travel.
Trading Center