Electronic vs Wire Transfers: Compared for Speed, Cost and Safety
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Author: Frank Day
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Wire transfers and EFTs are often confused, but there are differences between them. EFT is an umbrella term encompassing all automatic electronic transfers, while wire transfers are a specific type of EFT.
In this article, we cover the difference between wire transfers and EFTs, the benefits of each, and how you can choose which is best for you.
How to choose between an EFT and a wire transfer
Both wire transfers and other types of EFTs have their uses, but it will depend on the type of transaction you’re trying to make. Wire transfers hold some advantages over other EFTs, such as the speed of transfer and higher sending limit, but lower costs and extra legal protections are available with other EFTs.
EFTs vs wire transfers - Speed
Domestic wire transfers can be processed instantly, while other kinds of EFT can take longer, making wire transfers a better choice for time-sensitive payments. However, international wire transfers require more checks and verification, so often take much longer.
EFTs vs wire transfers - Security
They’re both a really secure way to transfer money, but you should be aware of potential scams nonetheless. Always make sure you know the identity of the person you’re sending money to, regardless of the type of transfer you’re doing. It’s easier to check all the details are correct before the transfer starts than it is to try and reverse it afterwards.
More generally, both EFTs and wire transfers are subject to stringent security checks to make sure your money is safe. There are a range of financial regulators that monitor the activity of financial institutions like the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Financial Conduct Authority, which help ensure all transactions are as secure as possible.
Data used for both wire transfers and EFTs is encrypted during transmission, which helps ensure only authorized parties can access your personal information while the transaction is taking place. Alongside this, a lot of banks use other security measures, like two-factor authentication, which ensures only the individual authorized to make the payment is able to initiate it.
Sending limits
You can usually send larger amounts of money at a time via wire transfer, with more limitations on the maximum amount that can be sent via other EFTs. This makes wire transfers more useful for larger transactions.
Cost
Generally, EFTs are more cost effective than wire transfers, as financial institutions will often charge a fee for bank wires. However, if you’d like to transfer money abroad, you might find it easier to arrange a transaction through a specialist money transfer provider.
What is an electronic funds transfer?
An Electronic Funds Transfer (EFT) is a financial transaction processed automatically through an electronic payment system. EFTs are entirely electronic, with no physical money or paper checks being processed.
How EFTs work
EFTs are processed electronically through either the Automated Clearing House (ACH), a payment terminal, or an ATM before reaching the recipient’s account. The speed of these transfers depends on the payment method, but is usually between one and three business days.
The Automated Clearing House
The Automated Clearing House is an electronic clearing network for processing EFTs in the United States. Transfers are processed and mailed to recipient banks in bulk, every business day at pre-defined intervals.
Types of EFTs
There are several types of EFT, including:
Debit card transactions
ACH transfers
Telephone bill-payment plans where periodic or recurring transfers are completed
Online banking
Electronic fund transfers overseas
What is a wire transfer?
A wire transfer is a specific type of EFT, designed to move money from one account to another electronically. Wire transfers require secure messaging systems, like Fedwire or the SWIFT payment system, that allow banks to communicate with each other and process individual payment requests.
How wire transfers work
A wire transfer is the electronic transfer of funds from one bank account to another. As wire transfers are a type of EFT, there’s no physical transfer of money or checks. The sender will provide instructions for the transfer, including the recipient’s name, bank, account number, and the amount of the transfer.
The sending financial institution sends a message to the recipient’s bank through a secure system like Fedwire or SWIFT, and the recipient’s bank makes a deposit from its own reserve funds to the recipient’s account. The financial institutions then settle the payment between themselves.
Making a domestic transfer in the US isn’t necessarily cheap, but making international wire transfers can be considerably more expensive. A cheaper way of wiring money could be a specialist money transfer provider.
EFT vs wire transfer: Which is right for me?
Both have their uses, so it really depends on the type of transfer you’re making and the most important factor to you.
Time
Wire transfers are often processed quicker than EFTs. If you need the money to arrive urgently, a wire transfer may be best. However, there are even faster ways to send money abroad than wire transfers, like specialist money transfer providers.
Cost
If you’re looking for low-cost transfers, you might find EFTs have lower transfer fees than wire transfers. Wire transfer fees can be high, so if cost is the most important thing to you, discover the cheapest way to send money here.
Amount
Think about how much money you’re planning to send. Wire transfers are better equipped for transferring large sums of money due to the specific checks in place to verify both account holders.
Purpose
If you’re sending a one-off transfer to a friend, a wire transfer may be the best method. However, if you’re looking to make regular payments to employees, it would probably be easier to send money via another electronic payment method like direct deposits.
The type of payment
EFTs cover a variety of payments including ATM transactions, direct deposits, and debit payments, whereas wire transfers are specifically payment instructions sent via banks or other financial institutions. Knowing exactly what type of transfer you’d like to make will help you decide whether a wire transfer or other EFT would be better for your needs.
Security
Both wire transfers and EFTs have security measures in place which help keep your payments secure, but some transactions are more secure than others. Typically, wire transfers are more secure than other EFTs as they rely on secure communication networks which only financial institutions can access.
Remember, it’s a good idea to put your own safety measures in place, like regularly reviewing your bank statement for any unrecognized transactions, and reporting any potential issues or cases of fraud to your bank as soon as you spot them.
Check your provider is regulated
You should only ever use regulated providers to transfer money. If a provider is not regulated, it’s likely to be a scam.
Remember: We will only ever recommend regulated financial institutions.
Other options for transferring money
There are other options for transferring your money, including:
Mobile money transfers
Funds can be sent via your mobile from a bank account, mobile money transfer provider, online money transfer provider, or cash-based money operators. Transfers are usually instant and limited to smaller amounts.
Cash pickup
Funds are sent in cash to a secure cash pickup point where the beneficiary can collect them. The recipient does not need a bank account to receive this.
Check
Instructions can be made by bank check. These are secured by the individual code on each check, which is registered to the sender’s bank account. The paper check can be sent to the beneficiary where they can bank it and have it exchanged for funds in their account.
Home deliveries
In countries like Vietnam and Thailand, money can be sent through online money transfer services and delivered to the beneficiary’s home address in cash.
Best options for international money transfers
Wire and electronic transfers are valid choices for sending money abroad. However, their fees are too high, and the transfer speed is too slow. Instead, choose money transfer companies to get a better deal. Some offer a mixture of variable and fixed rate pricing. This means that you can get a good deal when sending small and large amounts of money.
TorFX is an example of a transfer provider that offers a better deal than bank transfers for sending money internationally. They do not charge fees for transfers but instead require a small markup percentage for currency conversions. Also, they offer multiple transfer methods to offer better flexibility for different customers.
FAQs
What’s the difference between a wire transfer and an electronic funds transfer?
Wire transfers are a type of EFTs, whereby a bank or other financial institution sends a secure instruction through the banking network to move funds from one account to another. Electronic funds transfers are financial transactions processed automatically through an electronic payment system.
How do you make a wire transfer?
You can make wire transfers directly through your bank, or via a specialist money transfer provider. You’ll need:
The ID and account number of your bank account
Enough funds in your account to pay for the transfer
The beneficiary’s full name and contact details
The beneficiary’s bank details
Some banks or financial institutions will require more information before they can process the wire transfer. This will be stated when you begin the process, usually on a transfer form.
Does Canada accept wire transfers?
Yes, Canadian financial institutions can send and receive wire transfers in many different currencies, but using wire transfers may not be the best way to send money to Canada. A specialist money transfer provider may offer a faster, cheaper method.
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