Why does it cost money to wire money when writing a check is free?

Why does it cost money to wire money when writing a check is free? Presumably an electronic transfer costs the bank less to handle than a paper check (or a check painted on a door or a cow*). Although my bill payment service is able to make electronic payments on my behalf to my credit card vendors etc., and my small company can pay my employees by direct deposit via a payroll service, both services cost me money. My bank charges $20 per transaction, plus $5 per month for the service. You’d think the banks would be all over electronic transfers in order to save money, just like they push people to use ATMs instead of tellers. What gives?

You’ve got a crummy bank if they charge for direct deposit, many places waive other fees if you agree to it. As for electronic payment of bills, some of my credit card issuers set that up for free on a monthly basis (in exchange for always-on-time payments), others will (or at least used to) charge for it. Still, the numbers you quote seem unOgly high.

Beyond that… Justification for the fees is usually that it’s a convenience fee. If you don’t want to pay the charge you have to do more work. Plus, somebody had to pay for and set up the infrastructure to handle such transactions, and it’s a matter of point-of-view as to whether that cost should be directly passed on to consumers.

Writing a check isn’t free. Generally (depending on the account) there’s no per-check charge if you have a minimum balance, so it’s paid for by giving you slightly less interest on your balance (theoretically, at least). Go below that balance and you start paying per-check charges.

In reality, nothing is free. Everything must be paid for somehow. Your bank charges in the manner it does because it’s betting the advantages of banking there outweigh the disadvantages.

I can’t imagine paying twenty dollars for an electronic bill payment. (At my bank electronic banking including electronic bill payments is completely free.) Are you sure that the twenty dollar charge isn’t for a wire transfer, which I think is still quite expensive at most banks and is different from an electronic bill payment?

My guess is that they charge it because they can. People who do wire transfers are in a hurry, don’t have a lot of options, and are willing to pay extra. It’s kind of like paying your credit card bills over the internet. It’s normally free, but if you want to do it on the last day, you have to pay an extra 15 bucks.

Also, when deciding where to bank, most people don’t give a lot of thought to the fee for sending a wire. By contrast, there is intense competition in terms of minimum balances.

The exception that proves the rule is Mexicans and Central Americans living in the US, many of whom send lots of wire transfers. Recently Washington Mutual started offering accounts with free outgoing wire transfers to attract these people as customers.

According to this site,


it costs between 9 and 29 cents to transfer funds through the US wire transfer clearinghouse.

So clearly a bank that charges 10 or 20 dollars is making good money on the deal.

I used to work at a commercial bank and we did wire transfers quite often. There is a human labor element to the equation that has not been discussed. The local branch has to call the back office at the sending back, and the receiving bank has to do the same. Paying these people costs money.

Of course the banks are not running a charity, and they are making a tidy profit, but their actual costs incurred are exponentially higher than whatever arbitrary interchange fees the Feds sets.

Not really. My bank charges no fee for my checks (there is a minimum balance, but it’s very low, and set on average balance, so you can go under it fairly often; I’ve never had a fee assessed in over 20 years). In addition, they give you free checks for life; when I run out, I can order more without paying anyone.

I’m not earning interest, but that’s not an expense (“free” implies no payment; the fact that you could possibly earn money is irrelevant). They do have my money to lend others, so they’re making money on that, but for me, it’s free.


Let’s say that I go to a check cashing store with a payroll check. They will verify the funds and then draw on the account. The money will show up in the check cashing store “some time later” out of the payroll account. They just floated a loan with a very small risk. They charge for that, and I can see that.

Another example would be when you cash a check at the bank that it was drawn on. This risk is zero, and the cost is very cheap.

When you wire money, the funds are placed into the hands physically at one end and put into an account. They are drawn back off of the same account at the other end with zero risk involved, and no loan involved.

I’ve wondered the OP’s question myself. The one thing in common here is the willingness of the customers to pay for immediate cash, and their own lack of a way to get it.

The price of doing anything is only a little bit related to how much it costs the firm to provide the anything. That’s how they make money.

Not relevant, in the context of the OP. If a local grocery store had a deal where, if you provide a $1,000,000 security deposit (fully refundable on request), they would give you $200 worth of groceries every week at no charge, and someone asked how they could afford to give away those groceries when the store across the street would charge $200 for them … Well, the discussion of the economics of that security deposit is very relevant to that question.