These days, there are tons of options out there for sending money online. There are more apps dedicated to sending money than most people will need in a lifetime, so the options are truly endless. Show
Despite plenty of cash transfer apps on the App Store, these electronic wire options really boil down to two common formats — wire transfers and direct deposits. These methods are common, but you may not be familiar with exactly what they are and how they work. Some people don’t even realize that there’s a significant difference between the two. Read on for all the info you need to know, including the pros and cons of each and when you might choose one over the other. The key difference between a direct deposit and a wire transfer is that a wire transfer is a quicker method of transferring money, however, a direct deposit is cheaper.
What Is a Wire Transfer?A wire transfer is a type of electronic transfer that sends money from one bank account to another. Typically, individuals or businesses will use them to send money to another party overseas. However, you can also conduct a wire transfer to send money domestically. How Wire Transfers WorkWire transfers occur across a network of banks and transfer agencies from around the world. To conduct one, you’ll need to follow these steps. 1. Choose a ProviderMost financial institutions offer wire transfer services, with common providers being traditional banks and credit unions. If you’d prefer, you can go through a nonbank provider like Ria, Western Union, or MoneyGram. Their services may be cheaper or more convenient, so you should do your research before deciding what institution to use. 2. Choose the Transfer MethodProviders may let you complete wire transfers via the phone, an online portal, or an in-person branch. See what the cost of each method is to choose the most affordable option. 3. Fill Out the FormTo fill out the form, you’ll need to provide a government-issued ID. Information you must provide includes:
We recommend taking the time to fill out the form carefully. When the information is accurate and legible, you ensure the transfer goes as smoothly as possible. 4. Read the Fine PrintBefore you submit the wire transfer, read the fine print. Federal law gives you the right to know about all the taxes, exchange rates, and fees involved. 5. Keep the ReceiptWhen you go through a reputable provider, you should get a receipt. Keep this document on hand so that you can effectively deal with any issues that might come up. Who Uses Wire TransfersThough they may sound outdated, wire transfers are still a popular way to send funds quickly. Because they come with high fees, they are most common for occasionally sending large amounts of money. You may choose this method when they want to send money to friends or family overseas. For instance, if your relative lives abroad and needs money for an unexpected medical emergency, a wire transfer is one of the best ways to get funds to their bank account fast. While wire transfers are popular among individuals, companies can also take advantage of them. You might send one to your business partner who needs the money to close a deal with a tight window. Or, you might use it to purchase supplies or fund a construction project. Really, the possibilities are endless. Pros of Wire TransfersWire transfers are popular among individuals and businesses for several reasons. Here’s a look at the top pros: They’re FastOne of the best pros of wire transfers is that they’re speedy. Most recipients can access the funds within a few hours. In the case of international transfers, they may have to wait a couple of business days. However, the turnaround times are still much quicker than other methods of sending money overseas. Easy Currency Exchange OptionsWhen you need to send money in a currency that’s not your local currency, wire transfers make it easy. Most services will offer to exchange the currency. Just remember that you’ll have to pay any associated fees. They’re SecureWire transfers are safe as long as you use a reputable provider. They go through the Office of Foreign Assets Control to ensure those involved in terrorist or money laundering activities don’t get the money. Just be sure that you always follow common wire transfer safety measures. Never send money to someone you don’t know, and always double-check the information you entered before submitting the form. Cons of Wire TransfersAs great as wire transfers are, it’s worth examining their downsides. Here are a couple of cons you should be aware of: They can be ExpensiveIt’s no surprise that the convenience of wire transfers comes at a price. Fees will vary depending on factors such as the following:
If you’re sending money within the U.S., it will cost around $25 to $30. International transfers can typicall come with $45+ in fees. In many cases, it costs money just to receive the money. Because of these high fees, it doesn’t make sense to use wire transfers regularly. It’s best to send them when there’s an emergency, or you’re transferring large amounts of funds internationally. They’re IrrevocableOnce you send a wire transfer, you can’t get the money back. It’s important to be 100% certain you want the recipient to have the funds (and that their details are correct on the form). What Is a Direct Deposit?A direct deposit is another fast way to make electronic payments. However, this method has significant differences from a wire transfer. Learn more about direct deposits below. How Direct Deposit WorksDirect deposits rely on the ACH transfer system. ACH stands for Automated Clearing House and refers to the U.S. banking network that facilitates transactions between financial institutions. Banks, credit unions, and the Federal Reserve are all part of this network, making direct deposits super accessible. Who Uses Direct DepositYou’re probably familiar with direct deposits because of your job. Most companies use this method to pay their employees. It’s a win-win for everyone as employees don’t have to worry about paper checks and companies find it easier to conduct payroll. Realize that the federal government also takes advantage of direct deposit. It uses this method to make Social Security payments to retirees, send tax refunds, and collect corporate payroll taxes. Additionally, customers will use direct deposit to automate monthly payments. You might set it up to pay off your credit card or car loan. Pros of Direct DepositIndividuals, businesses, and even the government rely on direct deposit because of the following pros: They’re AffordableUnlike wire transfers, direct deposits are much more affordable. Recipients usually don’t have to pay any fees as their banks allow them to receive the funds for free. If you are a business, you may have to pay a fee to implement a direct deposit system. However, the fees are nothing when you compare them to the cost of sending frequent wire transfers. They’re ConvenientIn today’s world, few people want to deal with the hassle of paper checks. You have to worry about not only depositing them but also the possibility of losing them. There’s no doubt that it’s much easier to have your paychecks go to direct deposit. You can even choose to divide the payment between your checking and savings accounts. They’re SafeDirect deposits are safe as they go directly to your bank account. With checks, on the other hand, you have to consider the possibility of someone stealing and fraudulently cashing it. Cons of Direct DepositTwo cons of direct deposit to keep in mind include: They’re SlowerDirect deposit tends to be slower than other payment methods. Processing times vary depending on several factors, but most clear within one to five business days. This period is usually too long if you need to send money for an emergency. Chance of Incorrect PaychecksWhen your paychecks go right into your account, you might not be checking them as regularly as you should. The convenience can make it harder to catch inaccuracies. If you sign up for direct deposit through your employer, make sure you verify that your paystubs are correct. Direct Deposit vs. Wire Transfer — Which Should You Use?The bottom line is that one isn’t necessarily better than the other — each method is a practical way to transfer money electronically. Which one you should use boils down to your situation:
Matt is a veteran of the moving industry, a recognized moving expert and is the founder of Mover Focus. Matt holds a Bachelor of Commerce (BCom) majoring in Finance and Marketing and Bachelor of Arts (BA) majoring in Economics and History. He also has completed the EiM (Essentials in International Moving) course from the FIDI Academy. His advice has been featured in Reader’s Digest, Yahoo Finance, MSN Money, Business News Daily and The SpareFoot Blog Go. Read more. Which is safer wire transfer or direct deposit?Direct deposit is best for just about any payment between U.S. banks, credit unions, or other financial institutions. It's much cheaper, it's marginally more secure, and, in some cases, it can be just as fast as wire transfers.
Does a wire transfer count as a direct deposit?The bank excludes everything else, including teller deposits, wire transfers, debit card transfers, and ATM transfers and deposits. Customers have complained that deposits originating from Ally, American Express Bluebird, Capital One, Chase, and HSBC didn't qualify as direct deposits.
Is payroll direct deposit or wire transfer?You will use ACH transfers to pay your employees. You can use your payroll provider to set up direct deposit payments. You just need your employees' bank account information. Wire transfers are best used when you need speed and certainty of payment for a large amount of money.
Is there a difference between bank transfer and wire transfer?In short, yes: in a wire transfer, the sender's bank acts as an intermediary, sending information about the transfer to the receiver's bank before the money is moved, whereas a bank transfer simply involves sending money directly from one bank account to another.
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