Electronic banking offers you not only 24-hour access to cash, but also the ability to perform many different online transactions, including direct deposits and wire transfers. With electronic banking, you can authorize direct deposits, such as paychecks, to your account on a predetermined basis. In addition, you can use technology, rather than checks, to transfer money to another person or account.
To make one-time transfers of large sums of money from one person or company to another anywhere in the world in as little as a few hours, you can use a wire transfer. Banks, credit unions and some retail outlets referred to as “cash offices” can perform wire transfers. For wire transfers conducted by banks, the sender pays the amount sent plus a sender fee and the recipient receives the transferred amount less a recipient fee. According to My Bank Tracker, a consumer banking resource, you will pay a $20 or $25 outgoing wire-transfer fee and the recipient will pay a $5 to $15 inbound-transfer fee for a domestic transaction handled by a bank, as of 2013. In turn, a cash office charges a variable fee based on the amount of money transferred and the source and destination locations. To conduct a bank-to-bank transaction, both the sender and receiver must have accounts at financial institutions. Neither the sender nor the recipient is required to have an account for cash office-to-cash office wire transfers.
You can preauthorize the electronic transfer of money, which you receive on a recurring basis, to your bank account from the sender’s account using the electronic-funds transfer system. Such transfers eliminate the need for the manual deposit of cash or paper checks. Businesses and governments rely on the Federal Reserve’s Automated Clearing House network to have recurring payroll, Social Security checks and other frequent payments deposited into the funds' recipient accounts. Financial institutions do not charge a fee for this service, as of 2013.
Bank-to-Bank Wire-Transfer Method
To transfer funds between two different banks in the Federal Reserve system using a wire transfer, you provide the transferring bank the name and Federal Reserve routing number of the receiving bank and the recipient’s name and account number. The sending bank uses the Federal Reserve Fedwire system to request that a receiving bank handle the payment according to specific settlement instructions. Within hours, money is transferred from the sender’s account to the receiver’s account. To complete the transfer, each bank must have an account with the other bank or a third party -- a correspondent bank -- which acts as an intermediary between the transferring and receiving banks.
To authorize a direct deposit – electronic-funds transfer or ACH transfer -- to your bank account using the Federal Reserve’s Automated Clearing House network, you must provide the sending bank with the name of the receiving bank, the bank’s routing number, the name on your bank account and your bank account number. For paychecks, you provide this information to your employer. Both the bank’s ACH routing number and your bank account number are printed on the bottom of your checks. You can also contact your bank to get these numbers. It may require one or two pay periods for an employer to activate the direct deposit of your paycheck.
Billie Nordmeyer works as a consultant advising small businesses and Fortune 500 companies on performance improvement initiatives, as well as SAP software selection and implementation. During her career, she has published business and technology-based articles and texts. Nordmeyer holds a Bachelor of Science in accounting, a Master of Arts in international management and a Master of Business Administration in finance.