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Wire transfers allow people to send and receive money immediately. The money is sent electronically from one bank or credit union to another, or through nonbank providers. Nonbank providers include TransferWise and Western Union.
The money doesn’t physically move from one location to the next. Instead, the sender relays instructions regarding who will receive the money. That includes the banking number, when sending it to a bank, and the amount of money the recipient should receive.
The first wire transfer was sent by Western Union in 1872. At that time the financial provider had to use a telegraph network to send the money. The telegraph wires inspired the name “wire transfer.” Wire transfers were a new thing back then, but they are quite common now. People use them for various reasons.
Reasons to Use a Wire Transfer
Wire transfers work for any situation where people need money immediately. They are often used for buying homes since the money can be wired to the owner immediately.
In addition, people use wire transfers to send money to family and friends when they are in a bind. Since the funds are available immediately, the recipients do not have to wait to get access to important money. There is not a hold placed on wire transfers, and they can be completed quickly. Nonbank providers complete transactions within minutes, while banks typically transfer the money within hours.
Domestic vs. International Wire Transfers
People have the option of sending money both domestically and internationally, but it is a bit more complicated when sending international wire transfers. First, there is a difference with the speed. Domestic wire transfers are typically much faster than international wire transfers, at least when dealing with banks.
Banks typically limit the payment and delivery options for international transfers. However, nonbank options, such as Western Union, can typically deliver the funds within minutes.
Also, senders need to be mindful of exchange rates when wiring money internationally. Some transfer services require the sender to convert the money before sending. Otherwise, it is rejected. Others convert it for the sender, but if the sender fails to consider the exchange rate, he or she ends up sending more or less money than anticipated.
Fees Charged for Wire Transfers
Wire transfers are typically the most expensive way to send money. People pay for the speed they provide. Domestic wire transfers are typically more affordable than international wire transfers.
A standard charge for incoming domestic wire transfers is $15, and it’s typically $30 for outgoing domestic wire transfers. These rates can vary, but outgoing wire transfers are usually costlier. Also, an international wire transfer typically costs more than a domestic transfer.
How to Avoid Wire Transfers Scams
While there are lots of legitimate reasons to use wire transfers, scammers have found a way to take advantage of the system. Since sending wire transfers is like sending cash, they get people to send money to them without fear of it being returned. They dupe people out of the funds, and it is highly unlikely the victims will recover the funds.
Let’s look at the common wire transfer scams so you’ll know how to avoid them.
First, there is the counterfeit check scam. Someone sends a check or money order and tells the recipient to deposit it. The recipient is supposed to send some of the funds back to the sender via a wire transfer. Once the money is sent, the check ends up bouncing and the person is out the funds. Never send money to a recipient without it clearing the bank first. Also, there isn’t a legitimate reason why a person would send you a check and ask for some of the funds back via a wire transfer.
The lottery scam is another popular scam. People are notified that they’ve won a financial prize, but they must pay taxes or other fees before receiving the funds. Once the money is transferred, the scammers try to get more or they disappear. People should never have to pay for a prize. Do not send the scammer any money.
The hero scam is also a common one. People who list missing pets or personal items can become victims of this. Scammers peruse personal ads looking for posts about missing pets and items. Then they contact the person, saying they have the item but they must receive money before giving it back. Avoid this scam by keeping missing item listings simple. Don’t add all of the details, and make the caller describe the pet or item to verify it. If the person cannot provide identifying details, it is likely a scam.
Phishing scams are also a serious problem. Scammers send out emails posing as financial service providers, such as Western Union. They ask for personal information and then wire the funds themselves. Financial institutions never ask for information via email. These emails often look real, but they are a scam. Report the emails to the financial institution and use a spam blocker to block further correspondence from that sender.
People should guard their financial information and be wary of deals that sound too good to be true. Those who follow these two simple rules can better avoid scams.
Wire transfers are a helpful service since they allow consumers to receive funds quickly. As long as consumers are mindful of scams, they can use this service to their benefit, whether they are closing on a new home or sending money to friends half the world away. Transfers are safe, secure, and fast, making them an excellent option for consumers.
Author: Jeff Gitlen