How to Do a Wire Transfer

A wire transfer is a type of electronic funds transfer in which one party sends money to another.  Wire transfers can be completed from one bank account to another.  The sender of the money and the recipient never see the actual funds, as it is completely electronic.  Different wire transfer systems provide different options, such as the immediacy of the transfer.  Central bank wire transfers are conducted in real-time, meaning the money is available to the receiving party immediately.  These real-time wire transfers generally have much higher transaction costs than wire transfers that provide a transfer on a less immediate, periodic basis.  Wire transfers are different from an electronic funds transfer system in that the latter is similar to an electronic personal check that sends money directly from one's bank account, while a true wire transfer is more of an electronic cashier's check.  

The process of completing a wire transfer is relatively simple.  The party wishing to send money visits or contacts a bank and notifies them of the request.  The sending party must provide information such as IBAN and BIC codes, the receiving bank's routing number and the recipient's account number so the bank can determine where to send the money.  The bank sends a secure message to the bank of the receiving party detailing the specifics of the payment.  

Funds may take several hours or even days to transfer, depending on the type of service used and the transaction fees paid.  The banks track the flow of cash from wire transfers by either holding a reciprocal account together or using an intermediary correspondent bank.  Banks make money from wire transfers by collecting money from both the sender and the recipient.  The sender generally pays a fee on top of the money being sent, while the recipient usually receives less than the amount sent after fees are deducted.  

When sending a wire transfer, be sure to ask for a receipt of payment.  Wire transfers can be completed online, so you may need to get a faxed or e-mailed receipt.  If you do not receive an electronic receipt, contact the sending bank and let them know.  Of course, the best way to conduct a wire transfer is in person, as there is less likely to be an error.  Mistakes can be made when performing a wire transfer over the phone, and submitting your wire transfer request in written form can eliminate a lot of these potential problems.

Be sure you have sufficient funds in your account if you are the sender, or else the transfer may not go through.  Depending on how your bank account is set up, the wire transfer may actually go through anyway, but you will have to pay a fee for withdrawing more money than what was in your account.  Also make sure you account for wire transfer fees.  In the United States, wire transfers are not used often because they are costly.  Bank of America, for example, charges $25 to send a wire transfer and $12 to receive one.