A wire transfer is a method of transferring funds from one entity
to another. Wire transfers can be done by a simple bank account
transfer, or by a transfer of cash at a cash office or bank.
Bank wire transfers are often the most expedient method for
transferring funds between bank accounts. A bank wire transfer
is effected as follows:
* The sending bank transmits a secure message (via a secure
system such as SWIFT, or Fedwire) to the receiving bank,
requesting that they effect payment in accordance with the
instructions given.
* The message also includes settlement instructions. The actual
transfer is not instantaneous, but may take several hours to
transfer from the senders account to the receivers account.
* The banks involved must either hold a reciprocal account with
each other, or the payment must be sent to a bank with such an
account, or a correspondent bank, for further benefit to the
ultimate recipient.
Wire transfer, done bank-to-bank, is considered the safest
international payment method. Both account holders must have a
proven identity, and there is little possibility of a
charge-back, although wires can be recalled. Additionally,
information contained in wires is transmitted securely through
encrypted communications methods. The price of bank wire
transfers vary widely depending on the bank and its location,
and in some countries the fee associated with the service can
be costly.
Wire transfers done through cash offices, however, are
more-or-less anonymous and designed for funds transfer between
persons who trust each other. It is unsafe to send money by
wire for an unknown person to be collected at a cash office.
Banks within the United States utilize SWIFT to make payments to
banks in countries outside of the United States. For bank-to-bank
transfers that are conducted within the United States, the
Fedwire system is used. This system utilizes the Federal Reserve
System and its assignment of bank routing numbers (in a similar
way to how Automated Clearing House, or ACH payments, use those
numbers to effect the payment and collection of checks).
