Wire Transfers vs Bank Transfers: How to Choose Between the Two

With the rise in global payment gateways and fintech solutions provided by traditional banking networks, sending money from one account to another is easier than ever.

Consumers today are spoiled for choice and are often unaware of these payment solutions and their related technicalities.

ank transfer and wire transfer are two popular methods of money transfer, which are often used interchangeably by most parties. While both require a sender and a recipient with valid bank accounts, the internal mechanisms and processes differ for each.

In this blog, we look at wire transfers vs bank transfers and help you choose between the two. Continue reading as we thoroughly dissect the two methods and build your understanding.

What is a Wire Transfer?

Wire transfers are simple EFTs or electronic funds transfers that take place between one bank and another. They are conducted over a secured network for mostly international transactions.

If you’re a trader in the UK conducting business within the United States, you may have come across the SWIFT (the Society for Worldwide Interbank Financial Telecommunications) network for making payments in multiple currencies. SWIFT is a communication network deployed by financial institutions to accurately receive and record money transfer information. The network utilises wire transfers for international transactions and charges around 3-5% on each transaction.

SWIFT allows you to make payments in most global currencies. Unlike local transfers, the money here flows through a chain of different banks since the two banks involved don’t share a direct relationship.

To put it in simple words, think of wire transfers as a flight itinerary with multiple layovers in the way. Like you change destinations across airports when travelling internationally, your payments go through a network of intermediary banks before they reach the recipient.

What is a Bank Transfer?

A bank transfer is another key form of electronic payment transfer. It sends payments directly from one bank account to another. Think of Automated Clearing House (ACH) for electronic fund transfers in the USA and Single Euro Payments Area (SEPA) in Europe for payment options that use bank transfer.

Bank transfers made through the SEPA or ACH are much cheaper than payments through the SWIFT network. The price reduction is imminent since only 2 banks are involved in the process. Additionally, bank transfers take less time to process than wire transfers.

Bank transfers are usually preferred for sending nationwide payments and may not be as convenient for international payments. The United States has a Global ACH network for international inter-bank transfers, but the network and currencies on it are still limited.

Bank Transfer vs Wire Transfer

Wire transfers and bank transfers differ in the following aspects:

Choosing the Right Transfer Method for Your Needs

Urgency of the Transaction

One of the most important factors to consider is how quickly you need the funds to be available. Domestic wire transfers can often be completed within the same day, while international wire transfers typically take a few days. This speed makes wire transfers an excellent choice for urgent payments, such as emergency expenses or time-sensitive business transactions.

In contrast, bank transfers are a better fit for non-urgent transactions. While they may take a little longer—usually 1 to 3 business days domestically—they are more cost-effective. If your transaction can wait, a bank transfer is often the more economical option.

Transaction Costs

Cost is another crucial consideration when deciding between wire and bank transfers. Wire transfers, known for their speed, tend to come with higher fees – up to 5% in some cases. These costs can add up, especially for international transfers.

Bank transfers, on the other hand, usually have lower fees or might even be free for certain types of accounts or within specific limits. If keeping costs low is your priority and the transaction isn’t urgent, bank transfers offer a budget-friendly solution.

Transaction Volume and Frequency

If you regularly conduct large transactions, wire transfers might be more suitable due to their quick processing times. The efficiency of wire transfers can be advantageous for businesses or individuals dealing with high transaction volumes, where speed is critical.

For infrequent or smaller transactions, the lower costs associated with bank transfers can be more appealing. Consider how often you make transfers and the average amount to determine the most practical method.

Domestic vs International Transfers

Domestic transactions can be efficiently handled by either wire or bank transfers, depending on urgency and cost considerations.

For international transactions, the choice becomes more nuanced. While wire transfers can expedite the process across borders, they come with higher fees. Bank transfers can be slower but more cost-effective if you have the time to spare. However, wire transfers are more reliable and more readily available.

Conclusion

In the UK, financial transactions such as wire and bank transfers are regulated by entities like the Financial Conduct Authority (FCA), ensuring that these services adhere to strict standards of security and transparency.

To choose effectively between wire and bank transfers, evaluate each method based on your specific transaction needs, considering factors such as speed, cost, frequency, and international capability. Services like Safari Remit are designed to ensure your financial dealings are not only efficient but also secure, offering peace of mind and reliability in your financial transactions.