An external wire transfer is a way to electronically transfer money from an account at one financial institution to an account at another financial institution. External transfers can be used to transfer money between accounts you have at different banks; send money to a friend or family member’s bank account; or even to pay bills or pay for services.

External transfers are just one of the different types of transfers you can make, and there are several types of external transfers that you can use from an average bank account. They are a free or inexpensive way to transfer money between accounts.

Key points to remember

  • An external wire transfer is a way to electronically transfer money between an account you have with a financial institution and an account at another bank.
  • You can use external transfers to transfer money between accounts, to pay your friends and family, or (with caution) to pay bills.
  • There are several types of external transfer, with EFT and ACH being the most common. Each has different costs and time frames associated with it.

The basics of an external transfer

When you log into your online banking portal, use your banking app, or call your bank’s phone number, you usually have the option of making two different types of wire transfers: internal and external. Internal transfers are used to transfer funds between accounts you hold at the same institution, such as a savings account and a checking account; external transfers are used to send money from your account to another institution.

Using an external transfer, you can send money to an account you own or to an account held by someone else. The process is generally the same no matter where you send money to in the United States. External transfers can be used to send money to a friend or family member, for example to pay for a shared expense or send money for a birthday. or vacation.

In some cases, a business may ask you to pay for goods or services through an external transfer. You have to be careful because it could be a scam. The vast majority of businesses now use secure online payment platforms, and there are very few legitimate uses for external transfers. Because there is less protection for your money with an external transfer, you should only use it to pay for goods or services if you know and trust the seller. It is safer to use a credit card or Paypal if you are making a purchase from a seller you do not know.

If you are asked to make an external transfer to pay for goods or services, it may be a scam, so you should proceed with caution.

How to make an external transfer

The information you’ll need to make an external transfer is the same no matter what type of account you’re sending money from and where the funds go. This is because almost all external transfers go through the same system, more on that below.

You can use your online banking platform or your banking application, call your bank’s phone number or go to a branch to make an external transfer. You will need:

  • The account number of the account you are sending funds from.
  • The bank routing number of the account you want to send money to.
  • The account number of the account you’re sending money to.

Sometimes the person or organization you’re sending money to can help you set up a transfer, either by providing this information or even walking you through the process of setting up a transfer. .

Recurring external transfers

It may take longer to set up your first external transfer. Not only will you need to find all the information you need, but your bank may also perform additional security checks to make sure your transfer is genuine and the recipient is legitimate.

However, banks usually make it easy to set up the same transfer. Most banking apps will automatically add your recipient to a list of people you can send money to, and online banking systems will also remember that some recipients have already been verified.

You can also set up automatic external transfers from an account. (If you receive your paycheck by direct deposit, for example, this is a form of recurring external transfer from your employer’s financial institution to your account.) Most banks will allow you to set up a “Standing order” to transfer a specified amount of money at regular intervals to an external account.

History of external transfers

External transfers are just one type of a larger set of money transfers known as electronic funds transfers (EFTs). Since there are many types of EFT, you are probably using more than one without realizing it. All types of electronic money transfer are overseen by the US government.

In 1979, in fact, the US government adopted the Electronic Fund Transfer Act (EFTA). This law established consumer protections around specific types of electronic money transfers.

Several types of external transfers are covered by EFTA:

Wire transfers are another type of EFT payment that allows money to be transferred quickly between financial institutions around the world. Sending money internationally must be done by bank transfer. Wire transfers are typically made through specific bank-to-bank networks such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT) or Fedwire systems.

The difference between EFT and ACH

One of the most common sources of confusion when it comes to external transfers is the difference between EFT and ACH. ACH stands for Automated Clearing House, which is becoming a very popular way to make external transfers.

The ACH network essentially acts as a financial hub and helps people and organizations transfer money from one bank account to another. ACH transactions include direct deposits and direct payments, including business-to-business (B2B) transactions, government transactions, and consumer transactions. This network now processes more than 20 billion transactions each year, for a total of more than 40 trillion dollars.

ACH transfers are a bit different from standard EFT transfers. When you use your debit or credit card, for example, you set up an EFT transaction that takes place in real time. ACH payments, on the other hand, are batch processed every day.

This means that funds sent through ACH can take one to four days to move from one account to another, depending on the two financial institutions involved in the transaction. Large banks can often process ACH payments faster than small banks.

Funds sent through ACH may take up to four days to arrive in your recipient’s bank account, as these transfers are processed in batches rather than in real time.

The bottom line

External transfers are a fundamental part of the modern banking system, making it easy for individuals and businesses to transfer money between accounts. They are usually easy to set up, but you should be careful if you are asked to make an external transfer to a company or someone you do not know personally.