If you have international suppliers, one of the safest ways to quickly pay them is through a wire transfer. Wire transfers electronically move money from your bank account to the supplier’s account. Unlike waiting weeks for an international check to clear, the money is usually available within minutes of the transfer. A wire transfer also resolves any trust issues a company and supplier may have about whether adequate funds exist with which to complete the transaction.
Wire transfers arose in the era before the Internet or faxes as a way to transfer money over existing telephone wires. Today, wire transfers have retained their name but use more advanced technology to electronically transfer funds.
In Europe and elsewhere overseas, wire transfers are a common mode of payment for local expenses such as rent. The European Union regulates wire fees and has mandated that they remain low.
In the United States, however, wire transfers tend to be expensive: $25 is a typical fee. So American companies usually use wire transfers only for purchases with offshore companies. Wire transfers are useful in situations where suppliers are unwilling to ship goods without prepayment.
Despite the fees, wire transfers have gained in popularity over bank drafts, which are essentially cashier’s checks. While an advantage of bank drafts is the ability to have the draft made out in the recipient’s currency, the difficulties of sending the draft by mail — waiting for arrival, possible loss or theft of the draft — have made bank drafts a less desirable option in most cases.
To make a wire transfer, you need to follow a few basic steps.
- Gather your bank account information and the account information of the supplier you wish to pay. You’ll need the company name, address, bank account number, and the bank’s routing number. You’ll also need documentation so you can verify your identity.
- Investigate currency exchange rates. Various banks and wire-transfer firms may key their rates off different sources, such as the International Monetary Fund, to determine their exchange rates. Compare several rates to make sure you get a good one.
- Go to your bank or third-party office, or contact the company you wish to have manage your wire transfer online or via phone. Expect to spend some time setting up your first transfer. If you plan to make regular payments to a single supplier, tell the bank or provider so they can retain the information to speed future transfers.
- Enter your information. Be prepared to furnish proof that you’re authorized to transfer funds on behalf of your company.
- Carefully fill out your wire transfer form, specifying the exact amount of money you want to transfer and filling in the supplier’s name, address, and bank information. Double-check all your figures, because once the money is transferred, you can’t reclaim any excess funds unless the recipient initiates a new wire transfer back to you.
- Track your payment. Be sure to set up a tracking method with your bank or transfer provider, be it a phone call from the bank manager to confirm arrival, a fax, or e-mail notification.
Note that international bank wire transfers that originate in the United States are monitored by the Office of Foreign Assets Control. This agency reviews wire transfers to ensure that money isn’t being sent abroad to terrorist organizations or to countries currently under U.S. economic sanction. Inappropriate wire transfers can be blocked by the OFAC.
Business reporter Carol Tice contributes to several national and regional business publications.