Wednesday, June 15, 2011

Wire Transfers

In Europe, Wire Transfers are as common as ATM transactions.  In America, they are a huge hassle.

When I need to send money to overseas Attorneys or receive money from overseas clients, the wire transfer is usually the way to go.  My European friends never can understand why they such a hassle for Americans.  They tell me that in their country, they send wire transfers routinely, at little or no cost.  You want to send someone money?  You wire it - quickly and easily.

With U.S. Banks, you generally have to go into the bank or fax them documents.  If you fax the documents (and who has a fax machine these days?) they call you to verify the transfer.  And in addition to providing identification, they need the complete name, address, telephone number and fax number of the recipient, the name of his bank, his bank's address - including their phone and fax number, the bank routing number, the SWIFT code, and of course, the recipient's bank account number.  From you, they need your account number (but for some reason ask for my name, address, phone number, etc. as well) as well as the amount to be sent, AND a reference number for the transaction.

It may take 1-3 days for the wire to go through.  And usually the sending bank charges anywhere from $20 to $50 to process the wire transfer.

On the receiving end, many sending banks in Europe add on a $20 to $50 charge - which they charge to the recipient, and then your bank may tack on $10 to $30 just for the privilege of receiving money.  For anything less than a $1000 transaction, the transaction costs simply aren't worth it.

For these reasons, wire transfers are rarely used by most Americans - the transaction costs are just too high for routine transactions.   Settlement money for selling a house, or an inheritance are usually the only places most of see wire transfers.

Unfortunately, credit cards are no better - charging 2% or more of the transaction amount (often more, for overseas or unverified credit cards).   Even an overseas check is often dinged with a $15 to $30 processing fee by the receiving bank - even if drawn on a U.S. Bank! (you have to call them on this sometimes).  PayPal can send and receive money overseas, but they also charge fees as well (but are usually less than credit cards and are easier to use for smaller transactions).

We are so used to transferring money from one place to another without spending money to do so.  I can write a check, send it to California, and a friend can deposit it without paying a fee, and today, possibly not even waiting for a hold to clear.

Overseas transactions, on the other hand, are a lot trickier.  When money crosses International boundaries, it seems that everyone wants a piece of the action.

I am not sure that I have a ready answer for this.  For small transactions, PayPal seems to work OK, and since it takes a percentage of the take, not a flat fee, you can transfer small amounts of money without breaking the bank.

Credit cards work as well, but to accept money, you have to have a merchant account.  PayPal has recently been promoting the ability to accept credit cards without having a merchant account.  I will try this shortly, and if it works, I will get rid of my merchant account with ePay Secure.  I will write up how that works out.

Of course, if you have to send or receive wire transfers there are some things you can do to cut costs.  First, shop for a bank that has lower wire transfer fees - not all charge the same amounts, and whether the bank is larger or smaller doesn't seem to be indicative of how much they charge.  However, if you don't send wire transfers very often, picking a bank based on wire transfer fees is kind of silly - branch locations, other fees, convenience, online banking and the like are usually far more useful criteria in selecting a bank.

If receiving a wire transfer from overseas, be sure to tell the sender to pay their bank fees on their end and have any and all bank fees paid by their bank.  Otherwise, they send the wire transfer "C.O.D." so to speak.  This can mean that anywhere from $25 to $50 is deducted from the total, with another $15 to $30 being taken by your bank for the privilege of receiving the money.

Maybe someday, sending and receiving wire transfers in the USA will be as painless as overseas.   But I doubt it.  American Banks are so in bed with the credit industry, and as a result they would prefer you use credit cards for overseas transactions - where they can collect a hefty processing fee which is enhanced by overseas transaction charges...

UPDATE:  Bank of America has made it possible to do wire transfers online, which is helpful.  Occasionally, they offer discounts on this service as a promotion (e.g., free transfers for a month).   It beats standing in line at the bank!