Domestic or international, transferring funds has been essential for all types of businesses to run their core operations. Whether it is for investment or settling monthly bills, electronic fund transfer is undoubtedly the most efficient way to send money as quickly as possible. With the increasing use of online fund transfers, we also have more than one option like ACH transfer or wire transfer. This naturally explains why we often wonder which method is better and safer for transferring funds from one bank account to another.
If not as a customer, you have likely asked yourself such questions as a business owner before initiating the fund transfer. In this article, we answer all your questions by helping you understand what is a wire transfer and the difference between wire transfer and bank transfer. So, let’s delve deep into this topic – wire transfer vs bank transfer without any further ado.
What is a Wire Transfer?
A wire transfer is a process of transferring funds to another bank account electronically, eliminating the need to conduct physical meetings. Wire transfers are mainly used for international rather than domestic fund transfers. Financial institutions use the SWIFT network to initiate transactions to move money from one account to another in a quick and reliable manner, no matter how big the sum of money is. Therefore, wire transfer is the best bet when it comes to sending money outside of the country.
What is a Bank Transfer?
A bank transfer is an online process of moving money between two bank accounts. Unlike wire transfers, bank transfers utilize local payment networks like Automated Clearing House (ACH) or Single Euro Payments Area (SEPA). These payment routes are cost-effective in comparison to the SWIFT network, making it the preferred choice for initiating B2B transactions. The reason why many companies prioritize bank transfers is that they can pay bills or send money at no extra cost with standard transfers.
What are the Differences Between Wire Transfer and Bank Transfer?
Let’s break down bank transfer vs wire transfer to help you make the right choice for transferring money.
Time Required for Money Transfer
In terms of speed, wire transfers are quicker than bank transfers as they usually move money in a single day. On the other hand, bank transfers require more time to process the transaction and can take up to 2-3 working days. The time taken to send and receive money also depends on payment gateways, the origin country, and the destination.
Security
Wire transfers and bank transfers consist of multi-layered security to help users send money with peace of mind. A wire transfer uses an OTP-based login and also has security questions for whoever is requesting a money transfer. On the contrary, bank transfers work on a user-generated passcode that one needs to enter when initiating transactions.
Transfer Charges
No matter which platform you use for money transferring, you need to pay transaction fees. While bank transfers are cheaper than wire transfers, they can be often used to move money internationally. Transfer charges may go up if transactions involve currency conversion. That’s why you should compare fees before choosing the payment method.
Transfer Limit
Wire transfers offer higher limits than bank transfers. However, you need to connect with the concerned person if the transfer amount is too high. In the case of bank transfers, limits vary depending on whether you are sending money to any third party or paying your monthly bills. If you are sending money to verified bank accounts, you will enjoy higher limits as well.
Stop payments
If you made the payments using wire transfers, transactions can’t be stopped, which means you can’t retrieve the funds. The same can’t be said for ACH or bank transfers as you can cancel or reverse the transaction in case of duplicate payments or if you have mistakenly entered the wrong amount. Hence, funds can be disputed with bank transfers regardless of the amount.
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How Does a Wire Transfer Work?
Initially, the user needs to provide the required information to the wire. Upon collecting the basic details, it will ask you to enter the recipient’s information, including the amount that you need to send. So, type the amount, bank account number, and recipient’s name followed by the SWIFT code. Once you are done entering these details, the bank will deduct the money from the sender’s account.
The recipient will get the money on the same day if it is a working day or you might have to wait a little more. Notably, the sender and receiver both need to pay transaction fees depending on how much amount is being transferred. Also, be ready to pay more transaction fees if you are sending money internationally.
Wire Transfer Example
Let’s say you own a car detailing studio and you purchased goods worth $66,000 from an overseas supplier. Now, you want to pay the money and for that, you decided to go with wire transfers. So, you contacted any financial institution and provided the necessary details like the supplier’s name, account number, amount, and the SWIFT code. It will also charge you a processing fee of approx. $40 from your bank account. Hours later, the supplier will receive the money directly in their bank account.
How Does a Bank Transfer Work?
Bank transfer depends on the type of payment you choose before initiating the transaction. So, you need to confirm whether it will be a direct payment or a debit. The originator, the sender’s bank, the ACH operator, and the receiver’s bank collectively play a key role in processing the transaction.
Once you provide the details and request a payment through the Originating Depository Financial Institution, the ACH operator will allow funds transfer securely. This process might take a day or two as it processes the payment in tranches to the receiver’s bank. Later, it will credit the money to the receiver’s bank account.
Bank Transfer Example
Let’s say you run a grocery store and you have utility bills to pay every month. So, you decided to turn on recurring payments for $350 instead of logging into the website and clearing your monthly dues. Now, the payment provider will send details to your bank to request a money deduction. Once the request is approved, the bank will deduct the money and then, transfer $350 to the utility provider, making sure you have no dues in a particular month. This is how you can transfer funds between bank accounts via local payment routes. The ACH transfer process involves no transaction fees with the standard method.
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Conclusion
Wire and bank transfers each have their own way of sending the money. Time, transfer fees, and limits are factors that set wire transfers and bank transfers apart. Wire transfer can help you transfer money quickly, but you need to pay transaction fees. On the contrary, bank transfers are cost-effective, but they might take several days to credit the money in the receiver’s account. Ultimately, the transfer method depends on your requirements and the urgency of the payment. It doesn’t matter which one you choose, consider reviewing the details or comparing financial institutions before processing the payment.
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Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.
