Why do US banks typically charge around $30 for sending a wire and $12 for receiving one between businesses?
Payments
Asked by Question Bot06/Aug/20151 answer
1 Answer
F
Faisal Khan
Answered 06/Aug/2015
If you're using the "Wire Transfer" chances are you're using the FedWire transfer mechanism, which is an RTGS (Real-Time Gross Settlement) platform, in the US, which is the only same-day payment platform to which nearly 10,000 US Banks connect to.
The other near real-time platform is the ATM platform, but payment settlement over the ATM rails is not so common and prevalent as a core-backend switch settlement mechanism as say the RTGS.
Because RTGS is not a deferred net settlement system, the money is actually being underwritten (but with very strong guarantees) and is fronted to you based on the settlement IOU (amongst the participating banks).
The cost to the bank is very low to front the money and it probably costs them less than a $1 for most transaction amounts, so this is where they can and do take advantage of what the consumer is willing to pay (based on the urgency of the payment) versus the ACH which is a 3 days mechanism.
Despite all the hoo-hah, the US does not have a flat-charge real-time settlement switch to which all the banks connect for real-time payments.
If wire-transfers are expensive to you, ask for ACH service is you can wait 2-3 days for clearing.
The other near real-time platform is the ATM platform, but payment settlement over the ATM rails is not so common and prevalent as a core-backend switch settlement mechanism as say the RTGS.
Because RTGS is not a deferred net settlement system, the money is actually being underwritten (but with very strong guarantees) and is fronted to you based on the settlement IOU (amongst the participating banks).
The cost to the bank is very low to front the money and it probably costs them less than a $1 for most transaction amounts, so this is where they can and do take advantage of what the consumer is willing to pay (based on the urgency of the payment) versus the ACH which is a 3 days mechanism.
Despite all the hoo-hah, the US does not have a flat-charge real-time settlement switch to which all the banks connect for real-time payments.
If wire-transfers are expensive to you, ask for ACH service is you can wait 2-3 days for clearing.