A wire transfer is one of the most common ways to send money locally and internationally. People embrace this money transfer method because it is fast, reliable, and secure. But do these perks make wire transfer perfect? Certainly not. Wire transfer has a few disadvantages. In fact, some people are scared to send money via this method as it is irreversible. But there are some rumors that it can be reversed. How true is that? Can a wire transfer be reversed?
A wire transfer sent to a recipient cannot be reversed. But, there is an exception. If a bank makes a mistake while sending a wire transfer, it can reverse it.
In a world where mistakes are almost inevitable, people often prefer methods or means that are reversible. So, before sending money to a loved one, business partner, or client via wire transfer, you may be eager to know if you can reverse a wire should a mistake occur. I have covered that topic in this post.
Can a Wire Transfer Be Reversed?
To understand whether a wire transfer can be reversed or not, it’s important you understand what a wire transfer is first, including how it works.
A wire transfer is an electronic transfer of money that helps individuals residing in different locations safely send money to financial institutions and locations worldwide. No physical money is exchanged between the two banks involved in a wire transfer, just information.
Many different networks help in the wire transfer process, including the Federal Reserve Wire Network, the SWIFT network, and CHAPS (Clearing House Interbank Payments System). The term “wire transfer” comes from the fact that financial institutions depended on telegraphic wires to complete this kind of money transfer.
Uses of Wire Transfer:
What do people use wire transfer for? Of course, one of the common uses of this money transfer method is to send money to family and loved ones home or abroad. But is that all? No! Here are some ways you can use wire transfer.
- To wire money
The individual wiring funds to a recipient must first get “wire instructions” from the recipient. The recipient can get the instructions from the bank where they expect to get the money.
The sender will then submit the instructions to their bank with the money to be sent and the transaction fee. Afterward, the bank will request the sender to fill out the wire transfer form or provide an online form that the sender can get and fill out.
- To receive money
To receive funds through wire transfer, the recipient will need to provide their bank account information to the sender and the “incoming wire instructions” provided by the receiving bank. When the information is sent to the sender, the sender’s bank will make the transaction and transfer the money.
The funds will typically be sent within a day, depending on whether the transaction is domestic or international. The recipient’s bank will remove a transaction fee from the received funds.
Types of Wire Transfers and their Costs:
There are two types of wire transfers: domestic and international. Each of these wire transfer types has different costs and delivery times. While domestic transfers get processed within the same day, international wire transfers may take a few days to be completed. As for costs, wire transfers within the U.S. are charged approximately $25 per transaction, but the fee can increase to as much as $35, depending on the banking institution.
International transfers take longer because they must be cleared by a United States Clearinghouse and at least a foreign country’s processing system. People and entities use this method to send huge volumes of money in a foreign currency.
International wire transfers cost around $43 to send money from the U.S. to other countries. The recipient’s bank removes about $8 to $10 from the amount of money sent to the recipient. Some banks may impose some hidden costs above the transaction fee they charge.
How to Submit a Wire Transfer?
As soon as you have decided to use a wire transfer, take the time to complete these steps carefully:
- Get your information: How much money is being transferred? Where is it being sent? You’ll need institution account numbers for the sending and receiving accounts, identity verification (like a driver’s license), detailed contact information, and totals, including dates for submission. I have highlighted what you’ll need in the section below.
- Work with your bank or institution: Once you have selected an institution to take care of your wire transfer, call them or visit them to confirm the information and communicate fees and details.
- Submit the wire transfer: You’ll likely fill out a paper or online form and cover the wire transfer fee, if possible. Once submitted, the bank or institution will give you a receipt and confirmation that the transfer has been completed.
The steps may vary depending on the institution, and international wire transfers will include steps concerning currency and clearances in the destination country.
Information Needed to Send a Wire Transfer:
You cannot just walk into a bank and send a wire transfer just like that. You’ll need to provide the bank with some information to help them determine where to send the wire transfer. You’ll need the following information to send a wire transfer and receive it as well.
- Full name and address of the recipient
- Transfer sum
- Full name and address of the recipient’s bank
- Reason for the transfer
- Recipient’s account number and account type
- Recipient’s routing number
- SWIFT/BIC code (if applicable)
- IBAN (if applicable)
There may be more specific requirements for initiating a wire transfer, depending on which country you are sending money to. For instance, if you are sending money to someone in Mexico, you may also need to add an 18-digit CLABE number to identify their account number, location, and bank code.
As such, it is a good idea to reach out to the recipient’s bank directly to determine what you’ll need to initiate a wire transfer.
Advantages and Disadvantages of Wire Transfer:
Before using wire transfer to send funds to family, loved ones, etc., you may want to determine its disadvantages and advantages. Of course, like other money transfer methods, wire transfer has some downsides and upsides. Noting them will help in determining if it’s ideal for your needs. Here are some advantages and disadvantages of wire transfer.
Advantages of Wire Transfer:
- It is completed within hours
- Immediate access to funds
- It can be used for large transactions
- It can be used to send funds internationally
That said, let’s look at the downsides of wire transfer.
Disadvantages of Wire Transfer:
- It’s expensive
- It takes effort and a lot of time to submit
- It is irreversible and hard to cancel
- Commonly used in scams
Wire transfers are often the sole option for international money transfers or a huge transfer beyond the limits of an ACH transfer. That is why wire transfers are often used for businesses sending or receiving money, closing large real estate deals, acquisitions, and other big business transactions.
As said earlier, the disadvantages of wire transfer include the high transaction fees, information and effort needed to make the transfer, and the exchange of funds is often permanent. Scammers often zero in on consumers via wire transfers for this reason, so it is crucial to only carry out wire transfers when you are sure of the recipient’s intention.
Reversing a Wire Transfer: Is It Possible?
Wire transfers cannot be reversed once the payment order has been accepted. If you file a cancellation notice with your financial institution before the recipient bank has accepted the transfer, the transfer may be rejected. However, if your wire transfer has already been accepted by your recipient’s bank, unfortunately, your options are restricted.
You might be able to reverse your wire transfer if the sending bank makes an error. If the account name isn’t the same as the account number, the transfer may also be turned down before the funds are transferred into the recipient’s bank account in some cases. Although some banks will not check if the name and account number match up.
Tracking a Wire Transfer:
You cannot reverse a wire transfer, but you can track it. If your wire transfer is delayed or lost, tracking it is possible. Every wire transfer to or from a United States bank account passes through the Federal Reserve Bank, where the transaction is given a unique IMAD/OMAD ID. If a wire transfer between United State bank accounts takes over five days, ask your bank to trace the transfer using the IMAD/OMAD ID assigned when the wire was initiated.
The tracer will show how and when the transfer was processed between sending, receiving, and intermediary banks, and, most importantly, where it is now. In the unlikely event your wire goes to the wrong account, this is how you can locate it.
Alternatives to Wire Transfers:
Of course, wire transfers aren’t your only option for electronically transferring money from one account to another. There are many other tools you can use to transfer funds to meet your needs.
The ideal alternative to wire transfer is an ACH transfer via a bank’s bill pay or an online app payment service like Paypal, Zelle, Venmo, or other similar services. Banks can also offer wire transfer alternatives, like depositing cash into the person’s account at a branch of the bank they use, creating a bank draft, or drawing up a money order. Various methods can be carried out via mail (money orders, checks, cash mail) but are obviously less safe and unpredictable.
Are Wire Transfers Reported to the IRS?
The Internal Revenue Service may be concerned about wire transfers made at regular intervals to people without personal or business bank accounts or huge amounts. The Internal Revenue Service can see any wire transfers via U.S. banks or U.S. citizens, and banks are required to report any strange activity they see via wire transfers.
Investopedia reports that international wire transfers are closely monitored by several international organizations, including the Office of Foreign Assets ( affiliate of the U.S. Treasury) control to stop money from being sent illegally for money laundering or to a terrorist organization, for instance.
Average Wire Transfer Costs:
|Domestic outgoing wire transfer||$27 average|
|Domestic incoming wire transfer||$15 average|
|International outgoing wire transfer||$45 average|
|International incoming wire transfer||$15 average|
If you fund a wire transfer via a credit card, it is regarded as a cash advance. Cash advances will attract fees and interest rates on top of the cost from whatever institution is sending the wire transfer.
Receiving a wire transfer is usually free but occasionally requires a little (less than $20) fee for access and completion. There may be fees or special calculations for foreign currency. If you plan to transfer money through wire transfer often, it may make sense to consider sending larger funds less often to reduce the cost for sender and receiver.
A wire transfer fee varies according to the type of account you hold, whether you use online or in-branch services, and whether you transfer money in U.S. dollars or a foreign currency. The sender pays to make the transaction, and the recipient pays to get it.
Canceling a Wire Transfer:
Once you initiate a wire transfer, the money will be sent to the recipient. A transaction can only be halted if the receiving bank gets a cancellation notice from the sending bank before instructions are processed to finish the transfer. If the sending or receiving bank makes an error, they will reverse or modify a completed transfer.