'Wire Transfer' is explained in detail and with examples in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
A wire transfer is the quickest, safest, most reliable means of sending money within the United States, in other countries, or around the world. They are often essential in the more critical financial activities of life such as purchasing a house. The reason larger transactions occur in this form of payment is because the recipient can receive and verify the funds transfer the same day it is done, or as near to immediately as possible (besides Western Union and Money Gram, which cost substantially more to utilize).
A wire transfer actually represents a means to electronically transfer money from one party to another via a bank as intermediary. A traditional and typical wire transfer starts at a credit union or bank and electronically processes through either Fedwire or SWIFT networks. Another common name for such a wire transfer is a bank wire, which also encompasses the standard bank to bank transfers.
Ultimately the wire transfers have become so successful and utilized throughout the United States and rest of world simply because they are capable of moving even enormous sums of money to any destination bank in the world in only a day or two. If they are affected within the same country such as the United States then same day wires can be done. For an international transfer via wire transfer, it often requires another day or even two to complete.
Since the funds move rapidly through the financial system, recipients are not required to wait a material amount of time for the funds to become cleared. This means they can access and utilize the money without significant delays. No holds are typically placed on wire transfer monies. The safety issue means that merchants prefer the wire mechanism. This is because checks can bounce because of insufficient funds, while wires never do so. In other words, these are guaranteed funds.
There are some particular requirements that wire transfers need in order to be possible to transact. At least in the United States, both parties would require a functioning bank account in order for a bank to act as intermediary. Since thieves can not open a bank account too easily, nor bank anonymously in the United States, it is difficult for them to carry out scams using bank wires. This is because it leaves a paper trail which is easy for law enforcement officials to follow.
This does not mean that wire transfer scams are unknown entirely. It is possible for a person to be tricked into wiring money to a fraudster for a purchase or service they never receive. Examples of this are fake insurance policies or false retirement or investment products. Once the wire has cleared the recipients account, they can either withdraw the funds in person or wire it to an offshore overseas account.
By the time the victims realize that they have been scammed, the funds sent by wire will be long gone. They would no longer be recoverable by traditional U.S. law enforcement or even court order methods once they have been transferred offshore. Pulling money back after it has been dispatched via bank wire is extremely difficult in any case. This is true even if the funds remain in the recipient’s bank account.
Wire transfer fees can be significant. In many parts of the United States, they run as high as $40 to dispatch a bank wire. Many banks charge upwards of $10 in order for a bank wire to be received into an account. The costs to send one are higher if the wire is funded by utilizing a credit card cash advance. Cash advance fees would then apply, as well as typically large interest rates, plus the wire transfer fee. This is why it is typically most financially sound to effect a bank wire directly from the sender’s bank account.