A wire transfer is an electronic transfer of money. In the case of a bank-to-bank transfer, no actual cash is exchanged, but electronic balances in the respective accounts are adjusted accordingly. This is a very secure way to transfer funds, as positive identification of both account holders is required, and there is no chance of a charge back, unlike with a personal check.

Wire transfer has become a very popular method of payment for banking transactions such as credit card balance transfers, personal account management - e.g. transferring funds from a savings account into a checking account - and ATM-card purchases at point of sale. Every time you swipe your ATM card at a retailer, you are authorizing a wire transfer from the bank account associated with that card to the retailer’s bank account. A point of sale wire transfer is generally free to the customer, but a fee often accompanies other wire transfers. Sometimes this is a flat fee, and in other cases it is based on a percentage of the total funds being transferred. This is often true when credit card balances are transferred.

Companies such as Western Union offer an alternate, anonymous method of wire transfer. Western Union maintains outlets worldwide so that wire transfers can be electrically sent between these outlets. Therefore, you can walk into a Western Union in Arizona, for example, and send 100 US dollars (USD) to the Western Union in the Bahamas simply by paying the Arizona office the cash plus any fees. Your friend in the Bahamas can go to the Western Union to receive the 100 USD in cash within minutes. The money is transferred electronically.

A cash wire transfer is handy when someone does not have access to a bank account, but it also has drawbacks. If a cash wire transfer is used to purchase something from a private party, the seller can provide false information to the sender of the wire transfer. Cash can be collected at the receiving end under the false ID, and the party can disappear without ever providing the promised goods. Law enforcement is also concerned about subversive organizations using the anonymous method of wire transfer to fund illegal activities.

A bank-to-bank wire transfer has the advantage of being much more secure and desirable than other forms of payment. Wire transfers even save paper by reducing the need for checks and deposit slips, making them more environmentally friendly than standard forms of banking. To find out how you can benefit from wire transfers for automatic bill payment and other services that reduce hassle and paper, contact your banking institution.