If you need to move money between accounts or send a payment to someone at another bank, you may opt to use an electronic payment service called a wire transfer. Wire transfers can be sent either domestically or internationally, and there are times when a wire transfer may be the fastest and most convenient way to move money from one account to another. But wire transfer fees can be expensive and confusing; depending on the bank or service you use, you may not even know what you’re paying for a wire transfer until after it’s completed.
This is not ideal! And it’s especially not ideal if you’re a business that depends on wire transfers to pay foreign employees, vendors, or subsidiaries, as wire transfer fees have a way of stacking up quickly.
In this guide, we’ll review the fees banks commonly charge for wire transfers and why they charge them. We’ll also offer some tips on how to avoid expensive fees when sending money internationally—from learning how to spot deceptive jargon to choosing the most cost-effective option for your business.
What is a wire transfer?
A wire transfer is an electronic payment service used to transfer money between accounts. When a bank transfers funds to another bank via wire transfer, it typically uses a payment transfer network such as the Society for Worldwide Interbank Financial Telecommunications (SWIFT).
The two major types of wire transfers are domestic wire transfers and international wire transfers.
Domestic wire transfers involve the transfer of funds between accounts in the same country—for example, a business based in the U.S. sending a payment to a vendor based in the U.S.
International wire transfers, also known as remittance transfers, involve sending money from one country to another. Due to their higher degree of complexity, international transfers often come with higher fees—which we’ll get to shortly.
Why would you use a wire transfer to send money?
Wire transfers can be expensive. So why would anyone ever use them when other money transfer options, such as ACH transfers, exist?
One reason is that wire transfers are among the fastest and most convenient ways to send money from one account to another. While an ACH transfer may take a few business days to complete, a domestic wire transfer can generally be settled within a single business day. For this reason, they’re often used for bigger, one-time payments that require speedy settlement.
Wire transfers also have no geographic limitation—i.e. they can be sent internationally. This is a major perk for businesses that need to make cross-border payments or send money abroad from the U.S.
What are wire transfer fees?
We’ve already mentioned that wire transfers can be expensive, but why? The short answer is that many banks and money transfer services charge a fee to send or receive a wire transfer on a customer’s behalf. Yes, you read that correctly—a bank can even charge a fee to receive money.
Wire transfer fees generally break down into four main categories:
Domestic incoming fees are charged to receive money in a domestic wire transfer.
Domestic outgoing fees are charged to send money in a domestic wire transfer.
International incoming fees are charged to receive money in an international wire transfer.
International outgoing fees are charged to send money in an international wire transfer.
As you may have guessed, international incoming and outgoing fees tend to be higher than their domestic counterparts—though this isn’t always the case.
Another important point to note is that fees may vary depending on the customer’s existing relationship with the bank. In some cases, fees may be waived for certain eligible accounts. Some customers may even receive a discounted fee for completing a wire transfer online (as opposed to by phone or in person). We’ll discuss this more later, in the section about how to avoid expensive wire transfer fees.
But before diving deeper into the fees themselves, let’s take a moment to understand some important terminology you may run into when attempting to make an international wire transfer using the SWIFT international payment network.
SWIFT payments and the difference between OUR, BEN, and SHA
SWIFT is a widely used financial messaging system for international payments. It offers a standardized format that allows banks across different countries to send and receive payment information electronically.
We’ve already mentioned that banks may charge fees to both send and receive money. When you make a SWIFT payment, you can use the payment processing codes in field 71A (“Details of Charges”) to specify who will pay the transfer fees. Knowing what these codes are can save you from making a short payment (i.e. sending too little money) in an international wire transfer.
OUR means that you’ll pay all transfer fees before the transfer goes through. This is generally the safest option, as it ensures that a payment in the full amount specified will make it to the institution you’re sending it to (i.e. the “Beneficiary”).
BEN stands for Beneficiary. If you select BEN, you’re indicating that you expect the transfer fees to be covered by the receiving institution.
SHA stands for Shared. This means the transfer fees will be shared, with some charges paid prior to the transfer and some taken out of the transferred amount. As with BEN, this means the beneficiary will not receive the full amount of the transfer.
Some banks and money transfer services may not allow certain types of transfers; for example, you may not be allowed to select BEN or SHA for transfers made to bank accounts in certain countries. It’s always best to check with your bank or financial institution before you make a transfer, as this can help you avoid unpleasant surprises (like calls from your foreign vendors asking why they only received $800 for a $1,000 project!).
It’s also important to note that, in most cases, the sending bank does not determine or control what the receiving bank will charge. So, even if a bank offers free or low fees for outgoing wire transfers, they may use the BEN or SHA processing code to pass the wire transfer fees to the receiving bank.
As a rule of thumb, if a bank offers free international wires, always ask what type of wire it is. “Free” on one side may not mean “free” on the other.
How much do wire transfer fees cost?
There’s no single figure we can point to when assessing the cost of a wire transfer. Different banks charge different fees.
With that said, you can generally expect the fees for wire transfers made with a traditional bank or financial institution to be in a somewhat predictable range:
Domestic incoming wire transfer fees tend to be in the $10–$20 range. These fees could be lower or higher, depending on your relationship with the bank and the details of the transfer.
Domestic outgoing wire transfer fees tend to be in the $20–$30 range. Again, there’s high variance among these fees even within certain financial institutions.
International incoming wire transfer fees also have a high degree of variance, though they tend to be in the $10–$30 range.
International outgoing wire transfer fees are typically the most expensive wire transfer fees, and many banks charge up to $50 or more for these types of wire transfers. The specific fee may depend on the details of the transfer.
4 ways to avoid expensive wire transfer fees
If you’re feeling some sticker shock from looking at those fee ranges, well, it’s not all bad news. There are several ways you can save money when making international wires. We’ll break down a few of them here.
1. Choose your payment service or financial institution wisely
The most effective way to minimize wire transfer fees is to use a payment service that charges the lowest fees possible. Some financial technology companies may be able to offer more favorable exchange rates and currency conversion fees than you might be able to find at a traditional bank.
Levro, for example, offers fees that are up to 10x lower than banks and other financial institutions—with no hidden fees for international wires. You can also convert more than 34 currencies at competitive rates, so you can pay your employees, vendors, and other supplies in their local currencies.
2. See if your account qualifies for lower fees
If you want to make a wire transfer via your bank, first investigate any discounts that may apply to your specific account. For example, some banks offer free wire transfer services if you belong to a premium membership plan.
This may be beneficial if you send or receive international payments frequently. However, you may want to evaluate the cost of a membership plan to determine whether it’s actually worth it.
3. Check if there’s a discount for paying online vs. in person
Certain banks may give you a bit of a discount if you initiate a wire transfer online rather than at a branch or via a customer-service call. This makes sense, as you’re saving the bank some overhead by initiating the transfer electronically. Especially for simpler transfers made with a traditional bank, this option can save you a fair amount on fees.
4. Send domestic payments via local payment rails
Wire transfers don’t always make sense! In some cases—such as when you’re transferring money domestically and the receiver doesn’t need it right away—it may be a lot cheaper and more convenient to use local payment rails.
Local payment rails are systems or networks that exist to facilitate smooth and accurate payment transactions within a specific geographic area. One example you may be familiar with is a US local payment network known as ACH, which stands for the Automated Clearing House network. Another example is the Single Euro Payments Area (SEPA), which enables customers to make cashless euro payments to anywhere within the EU (as well as a number of non-EU countries).
Local payment rails may not be as fast at transferring money as wire transfers, but they’re generally far more cost-effective. Domestic ACH transfers in the U.S., for example, may cost only pennies per transaction. Cutting your transaction fees from dollars down to pennies can save your business a huge amount of money over the long term.
Other commissions and fees to look out for
Wire transfer fees are an important consideration, but they’re not the only consideration. Banks may hide fees in other places that are more difficult to parse for the average customer. Here are some other commissions and fees to look out for.
High foreign exchange rates
Some financial institutions give you the option to send money in a foreign currency or U.S dollars. These financial institutions may offer free wire transfers for international wires made in a foreign currency. This is a clear signal to check the foreign exchange rate associated with the wire transfer.
Why? Because banks do not typically label an unfavorable exchange rate as a “fee,” but a bad exchange rate can actually end up costing you more than a fee.
One way to determine the favorability of the exchange rate on offer is to check the interbank rate. Sometimes called the mid-market rate, the interbank rate is the rate at which banks and financial institutions transfer money back and forth to one another. It’s the rate you’ll likely see if you google the current exchange rate for a particular currency. The interbank rate is important because it gives you a helpful benchmark for what a fair exchange rate might look like.
Financial institutions may offer an exchange rate for customers that is higher than the interbank rate. In some cases, the financial institution may make a profit on this exchange rate that exceeds what it might make by charging a wire transfer fee.
Using the interbank rate as a reference, do the math to determine whether a $0 wire transfer fee is too good to be true. The costs may well be passed along or “hidden” in an unfavorable exchange rate.
Currency conversion fees
If you send an international wire in U.S. dollars and the receiving bank account does not accept U.S. dollar payments, the receiving bank may charge a currency conversion fee. Check with the receiving bank or the recipient beforehand to understand whether this fee may apply. If it does, that may help to determine whether you send your transfer in dollars or the recipient’s local currency.
Third-party or intermediary bank fees
In some cases, your bank may need to use a third-party or intermediary bank to complete a wire transfer. These intermediaries may charge fixed fees for interbank transfers that will be passed on to you. In general, even if your bank claims to charge a $0 fee for processing wire transfers, it’s good to ask questions about any fees that may apply from other institutions.
Use Levro for cost-effective wire transfers
Levro is fighting back against opaque and expensive wire transfers, with lower fees and greater transparency for international wire transfers.
Our platform offers an FX fee of 0.25% on top of the mid-market exchange rate, and our rates are up to 10x lower than those you’d find at many banks and financial institutions. Better yet, they come with no hidden fees, so you’ll know exactly what you’ll pay before you initiate a transfer.
With Levro you can even pay customers or subsidiaries in several countries through local payment networks, so international wires aren’t your only option.