A wire transfer is a secure and convenient way to send money electronically between different accounts. It is commonly used to transfer money quickly – both domestically and internationally – since other methods like cheques can take a long time to process. There are many reasons why you may need to send money abroad. Suppose, for instance, that your family member resides in the United States (US) while you reside in India. Using a wire transfer, you can send money to them. Let’s understand what a wire transfer is, how it works, how much it costs, and more.
What is a Wire Transfer?
A wire transfer involves transmitting money electronically between people or businesses without exchanging any physical money. Funds can be transferred securely between two parties even if they are in different locations. In most cases, a transfer is initiated by a bank or financial institution. It is the sender who provides all instructions for the transfer, including the recipient’s name, bank account number, and amount.
After the documentation is complete, a wire transfer can be initiated. Through a secure system, such as Fedwire or SWIFT, the initiating firm sends payment instructions to the recipient’s institution. When the initiating bank sends information to the recipient’s bank, the recipient’s bank deposits its own reserve funds into the correct account. Once the money has been deposited, the two banks settle the payment on the back end.
When sending money quickly and securely, wire transfers can be a useful tool-especially when the sender and recipient aren’t in the same location. Moreover, it enables large sums of money to be transferred. The amount of money that can be transferred is sometimes limited by firms, but these caps tend to be fairly high. For example, if a company wants to purchase a large number of goods from an international supplier, it may use a wire transfer facility to pay.
History of Wire Transfer
Wire transfer has been around since the 19th century. During the 1870s, Western Union used to send wire transfers through their telegraph network. In those days, senders brought their money to telegraph offices, and the operation would send a message and “wire” the money to another location. To ensure the funds were released to the right person, codes and passwords were used. In today’s world, the wire transfer is an electronic payment made through a global network, providing fast, irreversible, foreign or domestic electronic money transfers.
Types of Wire Transfer
In wire transfers, there are typically two types: domestic and international.
Domestic Wire Transfers
Any wire transfer within the same country that involves two banks or institutions is considered a domestic wire transfer. In order to execute a transaction, senders may need a code or the recipient’s branch number. Transactions are typically processed the same day they are initiated and can be received within a few hours. The reason is that a domestic wire transfer only requires an automated clearing house (ACH) and hence can be delivered within a day.
International Wire Transfers
In international wire transfers, origination and settlement take place in different countries. The sender has to initiate international transfers even if the recipient is in another country with the same bank. SWIFT or routing codes are required for these payments. There is a typical delivery time of two to three business days for international wire transfers. As a result of domestic ACH processing as well as its foreign equivalent, international wires must take an extra day to clear.
How Does Wire Transfer Works?
Wire transfers are most commonly used to transfer funds between banks and financial institutions. When conducting a wire transfer, no physical money is transferred between banks or financial institutions. Instead of money, information about the recipient, the receiving bank’s account number, and the amount are exchanged between banking institutions.
Wire transfers are initiated by approaching a banking institution and requesting a specific sum of money be transferred. For the bank or institution to know where the money is to be sent, the sender supplies the IBAN and SWIFT/BIC codes of the recipient. Make sure to check & verify beneficiary swift code before sending money abroad. Money needs to be deposited and a fee set by the sending institution must be paid before the transaction can be initiated. A message is then sent via a secure system such as SWIFT or Fedwire to clear the funds.
A message is sent to the recipient’s bank once the funds have cleared, asking it to execute the payment in accordance with the instructions provided. It may take several hours or days for the funds to reach the recipient’s account after the sender initiates the transaction. It is necessary for each of the banks to hold a reciprocal account with the other in order to settle the payment.
Wire Transfer vs Bank Transfer: What’s the Difference?
A wire transfer is a form of electronic payment in which funds are transferred directly from one bank account to another. When paying via wire transfer, a bank or a financial institution acts as a middleman. A bank receives the money from the sender. The money is then transferred to the recipient’s bank and finally to the recipient. Essentially, the sender pays for the transaction, and then their bank sends the message to the recipient’s bank. Messages will include all the necessary information regarding the transfer, including details about the sender, recipient, and amount.
Banks act as a go-between for sender and recipient, so there is no need for linking two bank accounts. Banks instead verify that you have the funds for the transfer. Your bank will then use the SWIFT system to send information about the transfer to your recipient’s bank, telling it to credit the recipient’s account.
Another form of electronic payment is a bank account transfer, which transfers money directly between bank accounts. One of the most familiar and common forms of domestic bank transfers is the ACH (Automated Clearing House). ACH is a network of banks and other financial institutions that transfers funds between them. In general, they operate via online or electronic payments and are named after the networks they utilize.
Direct deposit and direct payment are two types of ACH payments. Direct deposits usually cover tax refunds, interest and annuity payments. A direct deposit is typically made by a government agency or business rather than by an individual. By contrast, direct payments between bank accounts are conducted via credit and debit systems. Money is withdrawn directly from the sender’s account and deposited into the recipient’s account.
Although they sound similar, wire transfers and bank transfers are very different services. The main differences between the two are listed below.
| Factors | Wire Transfer | Bank Transfer |
|---|---|---|
| Speed | Generally, a wire transfer is the fastest method of sending money domestically, with funds usually available the next business day. | A Bank transfer on the other hand can take a little longer, taking up to three days to become available. In most cases, transfers are completed within a day. |
| Cost | Wire transfer costs can vary, depending on the amount and type of transfer, and international transfers will have a much higher price. While most charges levied on the sender, there is also a small fee for recipients to receive the money into their account with wire transfers. | Cost-wise, a bank transfer is usually the cheapest option. Although ACH fees are associated with direct deposits, they are generally lower than wire transfers. |
| Reversibility | Sending money via wire transfer is considered a secure method. However, as wire transfers are relatively instant, they cannot be reversed if they are made in error. | If money is sent in error or by mistake, an ACH transfer can be reversed, also making it a secure payment option. |
| International Transaction | Despite the fact that both Bank transfers and wire transfers can be used to send money across the country, only wire transfers can be used to transfer money internationally. | Although ACHS does have a bank-to-bank partner network, Global ACH, that offers international bank-to-bank transactions, yet to transfer money overseas, other transfer methods have to be used. |
What Are the Advantages & Disadvantages of Wire Transfer?
Wire transfers provide a number of advantages, a few of which are mentioned below:
1. Convenient
Wire transfer services are available across the globe. This makes it possible to receive and send money from anywhere. Transferring funds from one bank account to another can be done through wire transfer services. Most cities have wire transfer service centres, so you don’t have to travel far to find one, and you can even send money online without leaving your house. It is very convenient and easy to use, plus you receive your money in your own currency.
2. Fast
Wired money is sent and received in real-time. It is possible to send money while the receiver waits on it from across the globe at the same time. As soon as you complete the transfer, the receiver will be able to claim the funds in a very short period of time. This is in contrast to sending money through bank deposits, where there is usually a clearing period of a few days.
3. Safe
It is generally safe to transfer money via wire transfer. International wire transfers are regulated by wire transfer services. As a result, you can be confident that your money will reach its beneficiary in a safe and secure manner.
4. Global services
Getting the wire transfer isn’t as difficult as you might think. A global wire transfer service has many branches where money can be collected. Several wire transfer centres are also affiliated with banks. It’s easy to find out where you can receive your remittance by checking which service the sender used to send the money. You don’t have to wait long to receive your money since most transactions are cleared in real-time.
A wire transfer does not have any major disadvantages. The only downside would probably be the costs since a wire transfer service charges a fee. In most cases, the sender pays for the charge, and the receiver receives the entire amount. In some cases, however, a small fee or a percentage of the received money is still required from the receiver. The cost of international transfers is usually higher than the cost of domestic transfers. The transfer is also irreversible once it has been made. It will not be possible for the sender to get the money back if he changes his mind. Thus, you should be very careful when making a payment to someone whom you do not personally know.
How Much Money Can You Send via Wire Transfer?
Banks and money transfer companies have wire transfer limits and requirements that must be followed. There is a limit of $100,000 per transfer and $250,000 per day. Most wire transfers are charged a small fee by both the sending and receiving banks. To say it all, it is easy to send money abroad (up to 25,000 USD) from the comfort of your own home with a wire transfer.
How Much Does Wire Transfer Cost?
Different financial institutions charge different fees. There are several factors to consider. The following variables determine the final cost of your wire transfer:
- The amount transferred
- The current Goods and Services Tax (GST) rate
- Banks charge fixed processing fees for senders and recipients
- Any fee set by a correspondent or intermediary bank
- The bank charges a markup on exchange rates
Different financial institutions have different policies, terms, and conditions that affect the final cost. With BookMyForex, you won’t have to worry about any wire transfer fees. It is estimated that most banks charge between Rs. 500 and Rs. 2,500, but BookMyForex guarantees the lowest prices.
How Long Does a Wire Transfer Take?
Domestic wire transfers usually take a day or two. When it comes to international wire transfers, how long does it take? There are quite a few steps involved, either online or offline. To begin with, you need to write down the necessary information. Filling out a wire transfer form is the next step. The process will take only a few minutes if you do it online. Offline processes take longer.
Wire transfers are processed by banks only during business hours. Normally, the transfer takes 24 working hours, but you should check with your bank or institution. Nowadays, most banking transactions are conducted online. Hence, money should reach the recipient’s account immediately, thus making wire transfer an instantaneous process.
However, a wire transfer instruction passes through the SWIFT network. Banks acting as intermediaries may also be involved. In some cases, the money may be passed through three intermediary banks. Then, it reaches the recipient’s bank in a few days. It is therefore possible for international wire transfers to take up to two to three working days. It may take more time in some cases.
There are some factors that influence wire transfer time and cause a delay in its progress. Several details have to be entered such as account numbers and SWIFT codes. A wire transfer will be severely delayed if these details are entered incorrectly. Wire transfers also tend to be delayed during bank holidays. Bank holidays vary from country to country. Additionally, weekends can delay wire transfers. Some other factors can affect the speed of a wire transfer, such as the number of intermediary banks or currency conversions. When wondering how long a wire transfer takes, pre-planning is a good answer.
Is It Safe to Transfer Money via Wire Transfer?
You must choose a safe and reliable method for sending money overseas, whether it is for your child studying abroad or for a family residing there. Wire transfers are one of the most popular methods of money transfer. Is wire transfer safe, though? Is your money going to reach your child or relative on time and in full? Yes! Wire transfers are reliable, fast, and paperless. A wire transfer is considered to be one of the most secure methods of transferring money. Whether your bank or a nonbank wire transfer service initiates them, they are safe transactions.
Can You Cancel a Wire Transfer?
In most cases, wire transfers are final. Once the recipient’s bank accepts the transfer and receives the funds, the transfer is complete. At that point, you probably won’t be able to get your money back. Therefore, once the funds have been transferred to the recipient and there were no extenuating circumstances involved in the error-laden transfer, you cannot reverse the wire transfer. If the sender provides the wrong account information, wire transfer institutions and banks generally address the sender’s liability.
Why BookMyforex is the Best Option for International Wire Transfer?
The easiest and most convenient way to transfer money from India to abroad is via wire transfer. Even though banks handle wire transfers online, BookMyForex offer a cheaper alternative. The rates you get from an online marketplace like BookMyForex will be better than those you can get from banks. To process it, banks in India charge between Rs. 500 and Rs. 2500. BookMyForex waives off all sending charges associated with processing wire transfers.
BookMyForex through its exclusive tie-ups with leading banks can offer you the absolute best rates for sending money abroad with following advantages:
- Send money abroad from India at guaranteed lowest rates
- Fully online remittance process: Do everything from the comfort of your home.
- Fastest Transfers – Takes only 12-48 Hours
- Options to lock-in your rates
- Rate alerts to notify you when your desired rates are available.
To book your order or more information on international wire transfer visit Bookmyforex.com.
Related Resources:
Best Platform for International Money Transfer
Intermediary Bank Fee in International Money Transfers
Factors to Consider Before Sending Money Abroad
Best Ways of Sending Money from India to Abroad
New TCS Rate on Foreign Remittances
Types Of Money Transfer Frauds and How To Avoid Them
How to pay tuition fees abroad from India
How to save big on your Overseas Money Transfer with BookMyForex
How to Avoid Hidden Fees and Charges When Using Forex Providers for International Money Transfers
Leave a Reply