I just purchased a nice watch the other day from a reputable online dealer that offered the option of a wire transfer for payment.
Being that I didn’t want to have to mess around with money orders and cashier’s checks, I went the wire transfer route.
My bank asked for the following:
Amount
Bank name, city, state
Bank ABA/Routing#
Recipient name
Recipient account#
Once I gave that info to the teller, she said that it would be complete within 24 hours, saying that it would likely be out of my bank’s hands in short order, but that she had no control over the other end.
I did this at 12:30pm, the vendor confirmed receiving the transfer two hours later, and I am now happily wearing my new watch.
My question is about the mechanics of this.
The teller’s comments led me to believe that it isn’t a totally electronic process, so
what actually transpired?
Did my teller log into some secret “wire transfer” network and do it instantly?
Did she simply call the other bank and say “Yo dude, add X$ to so-and-so’s account… I promise I’ll take it out of minor7flat5’s account”
Do they deal with a middleman, perhaps the Federal Reserve Banks?
What happens if she swapped two digits in the account#?
My questions are about domestic wire transfers, but any info about international wire transfers would be welcome as well.
I’ve wondered this also. I’ve read some novels (especially by John Grisham) which mention a wire as leaving one bank at a certain time, and arriving at the other bank 20 minutes later. What is actually happening? (It sure sounds like emails, which usually arrive almost immediately, but sometimes float around in cyberspace for a couple of hours.)
Does your bank charge a fee for wire transfers? If I initiate a wire transfer from my bank (BofA), they charge $3.00 for a three day transfer, and $10.00 for a next day transfer. But if I have a vendor initiate the transfer (like automatic savings deposits to my ING account), there is no charge.
The article in Wikipedia doesn’t really help answer these questions.
Suppose, for example, that I want to wire $100 from my BankA account to your BankB account. I go to BankA, and I tell them, “Please wire $100 from my account, which is acct #1234, to my friend. He is account #7890 at BankB.”
Then, the people at BankA send a message to BankB: “Please add $100 to account 7890.” And they do it.
The problem is that the $100 has been removed from account 1234, and is in the possession of BankA. BankB, nice guys that they are, took $100 out of their own pocket, and gave it to account 7890. If this was two different branches of the same bank, no big deal. But if it is two entirely different banks, which might even be in different countries, then it seems that they are trusting each other to transfer the $100 in the near future.
I suspect this is what Wikipedia referred to by “settlement instructions”. Maybe they’ll actually send the cash by courier. Or maybe they’ll deduct $100 from a prior debt that BankB has to BankA. Or most likely, both banks have accounts at the Federal Reserve or some other sort of Bank’s Bank, and that’s how the banks even up with each other.
This one-off transfer cost $17. Since that was a minuscule fraction of the amount transferred, and it was the fastest way, it was fine by me.
Regular direct-deposit from my employer is free, like your ING account. But, I don’t even know if direct-deposit uses domestic wire transfer as its transport.
It’s been a little wierd in the past, but we’re getting closer to standarizing it all.
Today, you can almost always think of bank wires as being directly equivalent to ACH (automated clearing-house) transactions.
The transactions are routed through Fedwire (operated by the US Federal Reserve Bank) or SWIFT (an industry-owned international infrastructure). While wires are usually handled online, there are provisions for processing them via phone calls.
ACH transactions are handled similarly, but as the name suggests, will be entirely automatic. There’s also some “handshake” involved where the receiver has to authorize the transaction before the originator can actually enter the transaction, unlike wires which can sometimes feel like throwing a pile of money at the highway and hoping it lands in the back of a passing truck and makes it to the destination.
Due to fee structures imposed on banks and the push to standardize, most “wires” are actually ACH tranactions now. Also, the ACH system has quite a few categories such check-by-phone, point of sale purchases, returned/destroyed check presentation, direct deposit and web-based things like PayPal.