How Do Wire Transfers Work?

September 7, 2020
Short Answer. Yes! You absolutely can use CurrencyFair for business purposes. And you absolutely should.

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.

How do wire transfers work?

Domestic wire transfers

A domestic wire transfer or bank transfer refers to an electronic funds transfer method that is used by banks and other financial institutions. Here's how it works.

  • You contact your bank or non-banking money transfer company. You need to pay for your transfer and provide the recipient's bank account details (including a SWIFT or IBAN code).
  • Your service provider uses a secure system such as Fedwire or SWIFT to send payment instructions to the receiving bank.
  • The receiving bank deposits the money into the recipient's bank account by using its reserve funds.
  • Settling of funds between the service providers takes place after the recipient receives the money.
  • Wire transfers in the U.S. can go through on the same day, depending on how early in the day you initiate the transfer.

Wire transfers that involve non-banking financial institutions can do away with the need for bank account numbers. For example, Western Union gives you the ability to carry out domestic wire transfers without bank accounts.

International wire transfers

International wire transfers to foreign bank accounts follow a largely similar process:

  • You get in touch with a bank or an overseas money transfer company, provide the recipient’s name and bank account details, and pay for the transfer..
  • The service provider you deal with sends a message to the receiving bank or money transfer company using a secure system such as SWIFT, BACS, or Fedwire, instructing it to carry out the payment according to predetermined settlement instructions.
  • The actual transfer does not take place immediately and may take days to process.
  • The services providers at both ends might have reciprocal accounts, or they might use the services of a correspondent bank to process the payment.

How do same day overseas money transfers work?

There are numerous instances or people wanting to send money overseas in a hurry. For instance, you might need to send some money to a friend who needs it urgently or you may want to make a payment toward a debt before an impending due date. Fortunately, you can now make use of same day transfers to ensure that the money you send gets to its destination as quickly as you like.

Same day overseas money transfer options

While some of the leading banks offer same day expedited transfers, you’ll probably end up getting a less than favorable exchange rate and paying steep fees. Some specialist money transfer companies let you transfer funds to agent locations, and these transfers usually process within minutes. Some companies provide same day bank account transfers. With some, you may transfer money to mobile wallets in close to real time.

Sending money to a cash pickup location

If the recipient is in a hurry to receive money, you may consider sending it to a cash pickup location. Start by identifying companies that have agent locations in the recipient’s vicinity. The recipient will need to provide a reference number and a valid form of photo ID to collect the transferred money. Some of the leading companies that have agent locations in different countries include WorldRemit, Azimo, Ria, Western Union, and MoneyGram.

Sending money to a foreign bank account

Sending money to an overseas bank account is no longer as time consuming as it was a few years ago. Now, companies such as TransferWise, WorldFirst, OFX, Currencies Direct, and CurrencyFair process transfers to overseas bank accounts within one to three days. Factors that tend to affect turnaround times in this case include where you and the recipient live and how quickly the receiving bank processes the transfer.

Wire Transfer FAQs

How long do wire transfers take?

Domestic wire transfers are not instant. 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. Domestic transfers wire transfers take a few hours and the payment is usually processed on the same day. 

How long does an international wire transfer take?

An international wire transfer may take two to five business days, and even longer in some instances. Factors that can affect the turnaround time include the service provider you select, the recipient's bank, the number of intermediaries involved in the process, the currencies being traded, and the payment method.

What is the fee to wire money?

The average cost of wiring money internationally by using the services of American banks is around $45. A typical incoming wire transfer from overseas would cost around $15. For domestic wire transfers within the U.S., the average cost of an outgoing transfer is $25, and it is $15 for incoming transfers.

What is the cheapest way to wire money internationally?

The most cost-effective way to wire money internationally is to use the services of a specialist international money transfer company such as TransferWise, OFX, or WorldFirst. These companies charge little to no fees, and provide highly competitive exchange rates.

How much money can you wire without being reported

Yes, wire transfers may be reported. However, this depends on where you live and the country to which you wish to transfer money. In the U.S., you need to report any incoming or outgoing transfer of over $10,000 to the Internal Revenue Service (IRS). While the UK has no such limit in place, the Financial Conduct Authority (FCA) and HM Revenues and Customs (HMRC) monitor overseas money transfers to check for illegal activity.

Are wire transfers over $10000 reported to the IRS?

Yes, wire transfers over $10,000 are reported to the IRS.

How much money can you wire transfer internationally?

Where you and the recipient live may have a bearing on how much money you can wire internationally. Service providers may also have their own single transaction, daily, weekly, or monthly limits in place.

How long can a bank hold a wire transfer?

In most cases, recipients of wire transfers can access the funds as soon as the transactions reflect in their accounts. Some banks may place holds on these transfers, requiring recipients to wait for one or more business days. This is essentially done to safeguard their interests. Federal rules in the U.S. regulate how banks frame their funds availability policies. However, banks can be more lenient if they choose. For instance, a bank can make your funds available immediately.

Do wire transfers go through immediately?

No, they do not. In the U.S, most wire transfers go through within 24 hours. If a transfer takes place between accounts held at the same financial institution, the transferred funds might become available to the recipient immediately. International wire transfers may take up to five business days, or even more in some cases. This depends on the service providers at both ends, intermediary banks, and the currencies involved.

Is a wire transfer safe?

Yes. Wire transfers are safe, as long as you use a legitimate service provider and know the identity of the person receiving the funds.

Is it safe to receive a wire transfer?

Yes, receiving a wire transfer is safe. However, in case of a missing SWIFT code or an incorrect account number, the transaction does not go through as planned. In such a situation, tracking the transfer can be cumbersome and time consuming.

Can you track a wire transfer?

Yes. If the recipient does not receive the funds within the given time frame, contact your service provider and ask it to place a tracer on the transfer. This should give you an indication of its movement through correspondent banks as well as its existing location. Every wire transfer in the U.S. receives a reference number from the Federal Reserve, which you need to provide to your service provider. However, you cannot get in touch with the Federal Reserve directly to trace the transfer for you. In case the money gets lost during the process or ends up in a wrong account, your service provider might be able to recall the wire or initiate a stop payment. 

How do I track an international wire transfer?

If you have initiated an international wire transfer from the U.S., you may use the Federal Reserve reference number to track your transfer. If your wire transfer involves use of the SWIFT network, your bank may use the Unique End-to-End Transaction Reference (UETR) number assigned to your transfer to track its progress. The SWIFT tracking system lets participating banks find out just where the payment has reached. Several specialist money transfer companies let you track your transfer online.