What Is A Wire Transfer? – Forbes Advisor Canada

A wire transfer is the electronic transfer of funds from one account to another via your financial institution. In Canada, funds can be transferred in any major currency, both domestically and internationally. Once a wire transfer takes place, the payment is final and irrevocable.

The origins of wire transfers date back to the 19th century when senders would bring their money to the telegraph office. The operator would send a message or “wire ”, that included instructions and information about the recipient, the amount and the recipient’s bank account info, so that it could be picked up at another location by the authorized person.

Today, you don’t necessarily have to go anywhere in-person and you can commonly send a wire transfer from the comfort of your home. If your bank account does not offer wire transfers, you can use a service like Western Union.

A wire transfer sends funds electronically through banks and other financial institutions around the world.

When you initiate a wire transfer, the information is first sent to your financial institution where internal checks are conducted to establish sufficient funds in the account before the full payment is immediately debited.

In Canada, the recipient’s financial institution receives the wire payment message from SWIFT (Society for Worldwide Interbank Financial Telecommunication) in conjunction with Lynx, Canada’s system for high-value payments.

Any applicable fees are deducted and details within the payment message are used to deposit the payment into the recipient’s account. Once the payment settles, funds are made available to the payee immediately.

There are two types of wire transfers—domestic and international.

Domestic

A domestic wire transfer is initiated when you wire funds from a bank account in Canada to another bank account within the country. These transfers typically take one to two business days.

International

An international wire transfer is initiated when you send funds from your bank account in Canada to a bank account located in another country. Most countries are eligible to receive funds from Canada but in certain countries, sanctions may apply. International wire transfers also take longer, sometimes up to five business days, and can come with high fees.

Before initiating a wire transfer, determine if your financial institution offers them and whether you need to conduct the transfer in-person. It is not uncommon to be able to send a wire transfer online using your online banking platform. Whether you are sending the wire online or presenting yourself at your bank branch, you will need the following information in order to send a wire:

• Recipient’s name and address
• Recipient’s account number
• Recipient’s bank branch name and address
• Recipient’s bank’s routing information (three-digit Canadian financial institution number and five-digit branch transit number)
• Recipient’s bank’s SWIFT Business Identifier Code (BIC) if needed
• Payment amount

It is important to ensure the accuracy of this information to guarantee a proper transfer. If you make a mistake, contact your financial institution immediately for assistance.

Wire transfers are one of the safest ways to send money. A sender cannot initiate a wire without having the available funds, so a wire cannot “bounce” the way a cheque can. The payment is also generally not reversible. Therefore, wire transfers are commonly used for the transfer of significant sums of money, such as when making a down payment for a home.

Even though wire transfers are safe in one way because the payment is irrevocable, wire transfers are also a scammer’s preferred method of payment for that same reason. Always know who you are sending money to and confirm their banking details are accurate before sending funds.

Wire fees can be significant and are worth considering before sending a wire.

For example, BMO charges a $25 fee to send a domestic wire but a minimum of $45 to send an international wire, and $12 to receive a wire from anywhere. RBC, on the other hand, charges $45 to send a wire regardless of whether it’s domestic or international. Meanwhile, CIBC charges between $30 and $80 to send a wire, depending on the amount that is being transferred, and also charges $12 to receive a wire in any amount.

Note that fees can be incurred by both the sender and the recipient. International rates can be higher than domestic rates and the amount your sending could also impact your fees. This occurs because each financial institution involved may impose a separate fee of their own and there may also be additional foreign transaction costs.

An e-transfer, like the commonly known Interac e-Transfer, is probably the most popular way to send money. Its convenience is hard to beat as you only need the recipient’s email address or phone number to transfer funds. Plus, the service is often free, depending on your banking package.

However, there are daily, weekly and monthly limits to how much you can send. Therefore, they are better suited for transferring smaller sums of money than a wire transfer.

Pros:

• Secure
• Can be sent domestically or internationally
• Good for transferring large sums of money
• Funds are deposited in real time
• Usually can be initiated online

Cons:

• Fees can be high
• Are irrevocable
• Less convenient than other methods of payment

There are many ways to transfer funds in Canada without having to use a wire transfer. One of these options may make sense when you do not need to send a large sum or want to save on fees.

• E-transfers
• Electronic funds transfers (EFTs)
• Cheques
• Bank drafts
• Money orders
• Preauthorized debits