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How does an international wire transfer work?

How does an international wire transfer work?

If you need to quickly move money overseas, an international wire transfer is one way to do it. Wire transfers allow fast and secure transfers from one bank account to another even when the banks are in different countries.

What is an international wire transfer?

An international wire transfer is an electronic transfer of funds where the sender and receiver are in two different countries. If you're familiar with domestic wire transfers, they work similarly. There are just a few extra steps to account for the additional complexity of international money transfers.

A wire is an electronic transfer between banks. It's called a wire transfer because banks originally communicated over telegraph wires. Even though the technology has been modernized, little has changed about wire transfers. Banks participating in the wire transfer network can quickly communicate with each other to confirm that the sender actually has the funds to send money. This allows the receiver to know that the funds they receive are guaranteed. This is in contrast to a check or some ACH transfers where a payment could bounce.

When you do a wire transfer, physical cash doesn't actually move from one financial institution to another. Instead, banks add up the total money transferred to and from each bank. For example, Bank A might have a customer send a $1 million transfer to Bank B on the same day Bank B has two customers send $500,000 each to Bank A. When the transfer amounts between banks don't balance out, banks settle up behind the scenes. The recipient's bank doesn't need to wait to release funds because it knows the sender's bank has already verified them.

How does an international wire transfer work?

An international wire transfer works similarly to a standard bank transfer with a little extra paperwork.

  1. The sender completes an international wire transfer request. Depending on your bank, you can do this online, in a branch, by phone, or by faxing a form. Your bank may have limits on how much money you can send at a time. Most banks will raise this limit if you have an established account history and explain why you need a higher limit. The limit is mainly to prevent fraud.
  2. You will have to pay a wire transfer fee. If you're changing your money into a foreign currency, additional fees for currency conversion may apply.
  3. Your bank removes the funds from your account and sends the funds to the receiving bank. You will receive a confirmation you can send the recipient.
  4. Once your recipient's bank has received the funds, it will normally immediately release them to the recipient. However, funds availability policies may vary by bank.

In addition to a bank wire transfer, you can also use wire transfer services like Western Union or BILL. You will generally need to pay for an international wire transfer upfront using your bank balance or a debit card. Money transfer services often don't accept credit cards, and if they do, your credit card's cash advance fees and interest rates will likely apply.

What information is needed for an international wire transfer?

You will need the following information to complete an international wire transfer.

  • Recipient’s name or business name: The legal name of the person or business you're going to wire money to should match the name on their bank account.
  • Recipient's bank account number: This will usually be their international bank account number, or IBAN. While some people may be concerned about giving out account numbers, remember that the recipient's account number is also shown on their own checks as well as on the back of canceled checks that they have received and cashed.
  • Receiving bank's SWIFT code or BIC code: This bank identifier number is similar to an ABA routing number but used to identify banks in the international network. Part of the SWIFT/BIC code includes a country code.
  • Receiving bank's name and physical address: This is used to verify that you're sending the money to the correct bank. If you get the bank details wrong, you could lose your money.
  • Purpose of transfer: You may have to fill out an anti-money laundering transfer form that explains the purpose of the transfer. The requirements may vary based on your bank and what country you're sending the money to. Even if you don't fill out an anti-money laundering form, you should know that the Office of Foreign Assets Control (OFAC) closely monitors international wire transfers sent from the United States. The purpose of OFAC is to prevent money from being sent to individuals or groups connected with money laundering or terrorism.
  • Accepted currency: You will also need to know whether your recipient can accept funds in the same currency as you. Some people or businesses have U.S. dollar (USD) bank accounts. Others don't.
  • Currency exchange rates: If you're exchanging into a different currency, you may need to know current exchange rates and which party is responsible for fluctuations so that you pay the correct amount of money. Your contract may require you to send $1,000 in your currency and the other party will pay the cost to convert the money into their local currency when they receive it. In other cases, you might have to pay your bank to convert your dollars into Euros to ensure the other party receives exactly 1,000 Euros.

How long do international wire transfers take?

Domestic wire transfers generally get processed within a few hours. By contrast, international wire transfers often take up to two business days.

The extra time for international wire transfers is due to each country often having a separate network of banks. An international transfer usually requires an intermediary bank or clearing house to connect the two networks. Think of it like flying, where an airport will have direct flights to many domestic locations but an international destination may require a connecting flight.

International wire transfer fees

International wire transfers generally cost around $50 per transfer to send. Many banks charge up to $15 to receive an incoming wire transfer. When you exchange currency, your bank may also charge a small spread on the exchange. If the current exchange rate is $1 USD for 0.88 Euros, your bank might only give you 0.87 Euros per dollar. For large transactions, international wire transfers are often much more cost-effective than credit card or debit card payments that come with higher transaction and currency exchange fees.

As with other bank services, fees will vary by bank and your account level. Because international wire transfers still require manual work on the part of your bank (even if you just submit an online banking form), it is much harder to find a bank that will waive these fees or offer free transfers.

Pros and cons of international wire transfers

International wire transfers can provide convenience and security to those trying to send money to someone in a different country. However, it is not without its downsides. Here are the two sides you should weigh when it comes to international wire transfers.

Advantages of international wire transfers

  • International wire transfers can provide peace of mind due to their security features. When making a money transfer, banks often require multiple security measures like passcodes and verification. If you’re sending money to someone in a different country, international wire transfers are among the safest methods.
  • Transferring money using this method is convenient for many users. International wire transfers are typically straightforward and easy-to-use-payment methods. They can even prove useful to users when trying to determine exchange rates if they’re transferring money with a different currency than they have.
  • Because international wire transfers take only one to three business days to go through, this can be helpful in cases where users need to send money quickly. For instance, let’s say a business owner is taking a work trip to another country and they have a bill due date coming up and want to take advantage of the bill’s 2/10 net 30. (This means, instead of paying the full amount in 30 days, if the bill is paid within 10 days, you can receive a 2% discount.) The quick timing of an international wire transfer can help that business owner pay their bills on time and save money.

Disadvantages of international wire transfers

  • Unfortunately, international wire transfers often come with transfer fees which can quickly add up, especially if you have to pay fees from your bank and the recipient’s financial institution. This can make international wire transfers more expensive than other forms of payment.
  • While in some cases, the one to three business days it takes for international wire transfers to go through, in some instances, that process may not be instantaneous enough. In those cases, it’s important to plan ahead.
  • If you need to wire large amounts of money, an international wire transfer may not be the right choice for you as many financial institutes place caps on how much money you can send.

Is your bank the best option for an international wire transfer?

An international wire transfer is a valuable service, but if you need to routinely make a large amount of international wire transfers, you need to make sure you're getting the best price. BILL’s international payments solution offers free international wire transfers in local currency to over 130 countries along with competitive exchange rates. International wire transfers in USD are also possible with a fixed fee. To take advantage of BILL’s full suite of accounts payable and accounts receivable tools, sign up for a risk-free trial now or learn more about international payments with BILL.

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