What is a wire transfer?
A wire transfer is a convenient way to send money overseas, but high fees and exchange rate markups mean it's usually not the cheapest option.
If you need to send money overseas, a wire transfer is one option worth considering. This bank-to-bank electronic transfer method is simple and secure, but there are a couple of key drawbacks to be aware of before sending an international wire transfer.
What is a wire transfer?
A wire transfer is an electronic transfer method you can use to send money from one bank or financial institution account to another. The funds you transfer are sent via global networks administered by banks and other international transfer providers, such as the SWIFT network and the Fedwire network.
Wire transfers are sometimes also known as telegraphic transfers because they were originally sent using telegraphic wires. These days, you can initiate a wire transfer in online or mobile banking, or by visiting your nearest bank branch.
Once you provide the details of your wire transfer - such as who you're sending money to, their bank account details and the amount you're transferring - your bank then contacts the recipient's bank via the wire transfer network to relay the transfer instructions. The recipient's bank deposits the transfer funds into the recipient's account, and the banks then settle the payment between themselves.
You can send a wire transfer from your bank or credit union, or through transfer providers like Western Union, and domestic and international transfers are available.
How does a wire transfer work?
In order to send an international wire transfer, you'll need to provide a range of details to ensure that the money you transfer is sent to the right account. The easiest way to send a transfer is through mobile or online banking.
You'll typically need to provide the following information to complete a transfer:
- Your recipient's name, address and contact details
- Your recipient's International Bank Account Number (IBAN)
- The SWIFT code or BIC (Bank Identifier Code) - this is used to identify different banks around the world
- The amount you want to transfer
- The reason for the transfer
Once you've supplied the necessary information and submitted your transfer request, your bank can contact the recipient's financial institution to start the transfer process.
Finder survey: How do Australians prefer to send a money transfer?
Response | |
|---|---|
| I do not transfer money | 37.03% |
| App | 28.38% |
| Website | 19.1% |
| In person | 12.25% |
| Over the phone | 2.34% |
| Other | 0.9% |
Source: Finder survey by Pure Profile of 1110 Australians, December 2023
The costs to wire money
Many financial institutions charge wire transfer fees. These vary from bank to bank and depending on whether you initiate the transfer online or in a branch, but you can generally expect a fee of between $0 and $30.
Check out the table below for a quick guide to the cost of sending and receiving a wire transfer with the "big four" banks.
| Bank | Fee for sending a wire transfer online | Fee for receiving a wire transfer |
|---|---|---|
| NAB | $0 | Up to $30 |
| ANZ | Up to $9 | Up to $15 |
| CommBank | Up to $6 | Up to $11 |
| Westpac | $10–$20 | Up to $12 |
If you're sending an international wire transfer, the other cost you'll need to consider is the exchange rate markup. Unfortunately, banks and other financial institutions don't convert your Australian dollars into foreign currency at the "real" (or mid-market) exchange rate. Instead, they add a margin of 3–6%.
Let's take a look at how that can affect the cost of a transaction when you're sending $10,000 overseas. As you can see in the table below, a 5% exchange rate markup means your recipient will get £265 less than if you got the mid-market rate for your transfer.
| Mid-market exchange rate | Bank international wire transfer | |
|---|---|---|
| Transfer amount | $10,000 | $10,000 |
| Exchange rate | 1 AUD = 0.5300 GBP | 1 AUD = 0.5035 (5% markup) |
| Amount received | £5,300 | £5,035 |
Pros and cons of wire transfers
Pros
- Safe and secure. A wire transfer is a safe way to send money overseas, with transfers sent via well established and tightly regulated networks.
- Easy and convenient. You can send an international wire transfer via online or mobile banking, and you can transfer money to banks all around the world.
- Relatively quick. Wire transfers also offer a reasonably fast way to send money overseas, with transactions typically settled within a few days.
Cons
- Wire transfer fees. Wire transfer fees of up to $30 mean this is often not the most cost-effective transfer method, particularly if you're only sending a small amount of money. Your recipient's financial institution may also charge fees to receive a wire transfer, and intermediary fees may apply in some cases.
- Exchange rate markups. Banks add exchange rate markups of 3–6% on international transfers, which can significantly increase the cost of your transaction. You'll typically find better rates from an international money transfer service.
- Limits apply. Check whether your bank has maximum wire transfer limits and whether they suit your needs.
- There are faster transfer options available. If speed is important, you'll find faster transfer options from specialist transfer companies. Some providers even offer same-day transfers.
- Can't be cancelled. You can't cancel or reverse a wire transfer once you've sent it, so you might not be able to get your money back if you make an error.
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A wire transfer is a safe and convenient way to send money overseas, but it's usually not the cheapest. With lower fees and better exchange rates available elsewhere, not to mention faster transfer times in some cases, compare international money transfer services to get the best deal on your next international payment.
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