What Is Wire Transfer & How Does It Works?
Wire transfer is used to send money quickly from one location to another
Let us answer the question what is a wire transfer?
A wire transfer is an electronic way to transfer money. It is also known as bank transfer. Wire transfers have several advantages. This mode of transfer is fast and secure.
A wire transfer happens from one bank to another. Wire transfers are used to send money abroad. They are also used to send money to India from abroad. For instance, you stay in the United States (US). Your parents stay in India. You can wire transfer money to your parents. Also, let us say an Indian student is studying abroad. The student’s parents can send money using the wire transfer service.
We have now answered the question “what is a wire transfer?” Now, let us take a look at how the service works.
How does a wire transfer work?
In the past, banks used telegraphic wires to transfer money. This is how the term wire transfer was coined.
The most common way of wire transfer is through the SWIFT or Society for Worldwide Interbank Financial Telecommunication network. The SWIFT network is a messaging protocol. It has over 11,000 banks in 200-plus countries in its network. This network is used to send information from one bank to another. It also includes instructions for wire transfer.
Let us say a person in the US goes to Bank A. He wishes to transfer some money to India. The account he wants to transfer money to is with bank B. Bank A sends transfer instructions to Bank B. These instructions would include data. Firstly, the recipient’s name and bank account number. It will also have information regarding the transfer amount. Such instructions may not be directly sent from one bank to another. They may be sent via an intermediary bank. One needs to understand that there is no actual transfer of money. The money is deducted from the sender’s bank account. It is then added to the recipient’s bank account. That’s how wire transfer works.
Wire transfers are mostly used to send money overseas. Domestic wire transfers take a day. International wire transfers may take up to five days or even more.
How to do a wire transfer: Let us say you want to send money through wire transfer. You then need to provide the bank with some information. One is the recipient’s name and bank account details. The other is the amount of money you want to send. In some cases, you may need to fill up a paper form. Most banks, however, will let you complete the process online. Let's say you are receiving money through telegraphic wire transfer. You will have to send your bank account details to the sender.
Costs involved: Wire transfer involves certain costs. The remittance charges are mostly nil. The remitting or intermediary bank may levy a fee. There is a foreign currency conversion charge, which is a flat fee. Service tax is also levied. The service tax is a percentage of the total amount. It varies between 1 per cent and 0.1 per cent of the transferred amount.
Wire transfers are thus quick, convenient, and safe. Wire transfers make sending money abroad a breeze.
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