What is the Difference Between Domestic and International Wire Transfer?


Wire transfers are one of the most common ways to transfer cash between local and foreign banks. People or businesses looking to make this type of transaction may wonder what is the difference between a domestic and international wire transfer? In a lot of ways, these two transactions are quite similar. They both electronically transmit instructions over a secure network to make cash available to a recipient without the sender’s bank physically moving cash.

Domestic wire transfers in the US, however, use the CHIPS or the Fedwire systems to transmit transaction instructions. In the EU, local transactions follow SEPA rules. International wire transfers, on the other hand, use SWIFT, which is a network of over 10,000 banks and financial institutions spread across 200 and countries. Senders simply have to provide the recipient’s account number, SWIFT code, amount and currency to transfer, and the reason for making the transfer. 

Domestic Wire Transfers

US banks use the Clearing House Interbank Payments System (CHIPS) or the Fedwire to move money locally using wire transfers. Transactions that use the CHIPS system follow CHIPS Operating Rules which are set and facilitated by the New York Clearing House Association. These domestic wire transfers are cleared at the end of each business day when the system balances each bank’s books at the Federal Reserve Bank in New York. The Fedwire system follows rules that are set by the Federal Reserve. When sending a Fedwire wire transfer, your bank uses a nine-digit American Bankers Association (ABA) routing number to identify the recipient’s bank. Unlike the CHIPS system, Fedwire transfers are almost instant. The recipient can withdraw their funds as soon as they get a notification. 

International Wire Transfers

US banks use the same CHIPS and Fedwire systems to process international wire transfers. However, instead of local bank routing numbers, they send the wire instructions using the Society for Worldwide Interbank Financial Telecommunications (SWIFT) codes. SWIFT is an international non-profit organization made up of over 9,000 banks. While domestic wire transfers are processed within the same day, standard international wire transfers take up to two business days to appear in the recipient’s account. Any transfer that takes longer can’t truly be considered a wire transfer. The additional time is a result of using foreign processing systems instead of domestic Automated Clearing Houses (ACH). 

Domestic wire transfers only have to go through a local ACH, so they are processed within a day. International wire transfers also have to clear an ACH in the receiving bank’s country, which adds another day to the process. Factors such as bank holidays, time zones, weekends, and detail errors may delay wire transfers. It’s, therefore, vital to double-check account numbers and bank codes before finalizing a wire transfer. 

International Wire Transfer Costs

Whether you want to send money locally or abroad, there are charges associated with making a wire transfer. Most local banks charge around $25 per transaction, but it’s not unusual to pay as much as $35. For international wire transfers, you should be ready to part with around $40-$45 per transaction. When you send money abroad, you may also have to pay additional fees that don’t apply to domestic wire transfers. Such fees include intermediary bank and currency conversion fees. 

For most payments, it’s customary for the sender and recipient to split the wire transfer fees. The sender typically pays for any fees that their bank charges, while the recipient covers intermediary and receiving bank charges. Such an arrangement is quite convenient, as both parties can consult their banks to know how much fees they’d have to pay.

US Wire Transfer Requirements

When making a domestic or international wire transfer from the United States, your bank may request a photo I.D. and proof of residence. Businesses may need to provide articles of incorporation so that anonymous transfers are impossible. However, chances are you already have an account with the bank and would have already submitted these documents. In that case, making a domestic wire transfer should be a simple matter, either at your local branch or online. If you’re making your first wire transfer or one that exceeds $10,000, your bank will likely give you a call to confirm the transfer. For wire transfers above $10,000, you’ll also need to specify a reason for transferring the funds, and your bank is required to inform the relevant authorities that monitor bank fraud.

The Office of Foreign Assets Control, which is an agency of the US Treasury, monitors all international wire payments that originate in the United States. This agency ensures that these transfers aren’t being used for money laundering or terrorist funding purposes. The Office of Foreign Assets Control also freezes funds being wired to countries under sanctions by the US government. Your international wire transfer may also get flagged if you’ve made it out to a non-account holder or a safe-haven country. Regular transfers with the same dollar amount or no viable reason and large wire transfers by cash businesses may also be deemed suspicious.

EU Wire Transfer Requirements

Domestic wire transfers in the EU are processed using a Bank Identification Code (BIC) or SWIFT code. The International Bank Association Number (IBAN) is used to identify the recipient’s bank. Whichever protocol is used, banks in the EU are required to adhere to the Single Euro Processing Area (SEPA) regulations. SEPA regulations ensure that wire transfers across borders to member states don’t exceed those for making a domestic transaction. As such, most EU banks don’t charge intermediary fees for SEPA international wire transfers. These banks can, however, currency exchange fees. After Brexit, UK residents still enjoy the benefits of SEPA wire transfers, but they may need to provide additional information to make a transaction. 

Wire transfers from the EU to non-member states, however, don’t follow SEPA rules, so this type of transfer is prone to service fees. But even then, making international wire transfers from the EU is cheaper than from the US.

Alternatives to Wire Transfers

It is worth noting that there now exists alternatives to wire transfers, in the form of digital payment providers and transfer services. These companies, such as Cashero, often use blockchain technology and smart contracts to facilitate instant payments and transfers, with minimal to no fees. Because of this, there is no difference between making domestic and international transfers through such companies. In some cases, large amounts of funds may be subject to governmental scrutiny, but that will depend on the regulations under which the company falls. Many of the issues common to wire transfers – transfer fees, dealing with time zones, and weekends, potentially poor exchange rates – are easily solved when using more modern digital payment providers. If you will regularly be sending payments via wire transfer, it may be a good idea to look further into these types of digital transfer services. 

The Bottom Line

A wire transfer is a type of electronic funds transfer that banks and money transfer agents around the world use to move money. While senders can make the transfer in cash at a bank or other financial institutions, no physical cash is exchanged between banks. Instead, information such as the recipient’s account number, bank routing number, and the amount transferred are passed electronically between the relevant banking institutions via a secure system such as SWIFT or Fedwire. The receiving bank makes cash from its own reserves immediately available to the recipient and then settles the payment with the sender’s bank later. Such a setup allows people and businesses in different geographic locations to send and receive money quickly and securely

You can send funds from your bank to a recipient who uses another bank that’s located in the same country or financial zone using a domestic wire transfer. This is different from international wire transfers, which are made out to banks and financial institutions in foreign countries and financial zones.

For both domestic and international wire transfers, the sender can cover all transaction fees or split them with the recipient. Banks typically charge between $25 and $35 for domestic wire transfers, while international transactions may attract fees of up to $45. For international wire transfers, currency conversion fees may also apply. While local wire transfers take a day, at most, to reflect in the recipient’s account, international wire transfers take up to 2 business days.

There now exists alternatives to Wire Transfers in the form of Digital payment providers, who can offer low fee or even free transactions, that are often instantaneous. Since these companies are often fully digital, they can operate 24/7 providing users the ability to make transfers anytime. Cashero is one such provider, offering free, instant transfers, along with industry leading return rates for funds held in a Cashero account.

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