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Paul Tracy

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Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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Updated August 5, 2020

What is a Wire Transfer?

A wire transfer is a method of transferring money electronically between two people or institutions.

How Does a Wire Transfer Work?

A wire transfer is made between two financial institutions by a person issuing instructions to one institution. The instructions include the special bank routing costs, a unique code for each institution and branch, to ensure that the wire transfer ends up in the right bank and the right account. The institution then sends the instruction to the recipient, confirming the upcoming transfer. The instructions are sent via a secure wire system known as SWIFT, for international transfers or Fedwire, for domestic US transfers.  

Once the transfer of funds is completed, both institutions maintain "reciprocal" accounts for the amount of the transfer until the transfer is settled. If a bank cannot set up such as account, the transfer is handled through a correspondent bank that will transfer the funds to the intended institution.

Wire transfers are regulated in the US by Federal Regulation J and by the Uniform Commercial Code.

Why Does a Wire Transfer Matter?

International wire transfers can be costly, including the cost of the transfer itself and a fee to cover the spread in the exchange rates between two currencies.

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