Wiring money is convenient,
it can be slow and costly, too
money is one of those conveniences that nearly everyone relies on
at some point. The swiftness and security allow banks around the
globe to exchange billions each day, and give grandma the enjoyment
of knowing her grandson will get his cash gift on graduation day.
If the phrase "wiring money" makes you
think that the transfer moves as fast as lightning, though, think
again. If speed is what you need, banks are not always the best
place to go. Most banks will tell you it takes one or two business
days to complete a domestic transfer and at least four for international
As with any financial service, it's smart to
shop around. Prices and delivery time vary among the banks and other
outlets that offer the service.
banks take longer
There are several reasons for lag times with banks. If the institution
is not a member of the Federal
Reserve, it must go through a "correspondent bank" that is a
member to process the transaction through Fedwire, the public sector
wire transfer system.
It may take longer if you initiate the transaction
late in the business day, especially on a Friday. And some banks
wait until they get several transactions to process so they can
do them at the same time.
"Banks are dealing with a lot of backroom processing
when they say it takes several days or so," says Stephen Cohen,
a financial services analyst for the Board of Governors of the Federal
With services such as Western
Union, which has its own proprietary system, same-day delivery
is guaranteed. However, the price gap between Western Union and
banks is big.
Banks usually charge a flat rate for transfers,
while Western Union's rates climb as the dollar value of the transaction
For example, Citibank
charges $20 for a domestic transfer -- whether it's $500 or $5,000.
Western Union charges $43 for a $500 transfer and $220 for a $5,000
transaction. Their fees are even higher if you call, rather than
take cash to an agent, and send the money using an advance on a
The private companies cater primarily to people
who don't have bank accounts, expatriates sending money to their
home countries, traditional bank customers who need to move money
faster than the bank can and tourists far from their local banks.
The agent will issue the recipient a check, then cash it for them.
Some banks, on the other hand, will do transfers
for their customers only. Others charge noncustomers a $5 or $10
There are also fees on the receiving end with
banks. It can cost $10 to pick up a money transfer.
about international transfers?
Before initiating an international transfer that involves currency
exchange, a few phone calls can save you some bucks. Exchange rates
vary daily. Check with commercial banks, private systems such as
Western Union and MoneyGram,
and currency houses such as Thomas
Cook to compare the difference on rate spreads.
Jeff Stehm, an analyst for the Federal Reserve,
recommends checking the wholesale exchange rates published in newspapers.
"These can give you an idea of the difference between those rates
and the retail rates," he says. "The bottom line is, it's going
to pay to shop around."
Expect to pay at least 1 percent of the dollar
value for foreign exchanges, in addition to the cost of the wire
If you are sending money to Mexico from California,
Texas or Illinois, check with the U.S.
Postal Service, which began offering wire transfers in 1997
under a program called Dinero Seguro, or "Sure Money."
"Our exchange rate is always a little bit better
than Western Union, maybe not as good as MoneyGram, but competitive
with retail rates," says Maria Pell, product manager for the Postal
Service's retail business.
International transfers pose the greatest risk.
Foreign banks are not always as heavily regulated or technologically
advanced as U.S. banks. And foreign deposits are not insured.
Small storefront operations, of which there are thousands in
cities with dense immigrant populations, are the most common targets
of wire fraud investigations. Pell says Dinero Seguro started as
a result of requests from immigrants "to help them get money safely
across the border."
"There are a lot of shady money-wiring businesses
out there," she adds.
John Kennedy, investigations manager for Florida's
state Comptroller's Office, recommends that before using a wire
transfer operation that is not mainstream, make sure it has a state
license to do such business. "Don't let them show you an occupational
license from a county or city," he says.
Kennedy says his office is currently looking
for the operators of a Miami company, Pinolero Delivery, that went
out of business after about 2,000 customers complained that money
they wired to Central America never made it there. "The victims
are people who feel more comfortable going to such places either
because there are no banks in the area or they can't open an account,"
If you have a complaint, contact your state
comptroller's office or its division of banking and finance.
Susan Grant, director of the National
Fraud Information Center and Internet
Fraud Watch programs of the Washington, D.C.-based National
Consumers League, says money lost through wire transfers to
foreign countries is difficult to retrieve.
"By the time you realize it, the money is already
gone and it's a matter of trying to get it back from a crook," she
says. "It's harder to stop and harder to dispute than something
like a credit card transaction."
-- Posted: Oct. 12, 1999