If you are making a large purchase, the seller may request to have the funds sent directly to his bank account in the form of a wire transfer. A seller generally will accept a wire transfer as a safer form of receiving money than a check, which can be denied due to a stop payment order or insufficient funds in the buyer's account. A wire transfer can be stopped as well, but only if the buyer acts quickly.
TL;DR (Too Long; Didn't Read)
The time frame you have to reverse a wire transfer is extremely short, and in some cases where the transfer is instant, you won't be able to reverse it at all.
How Does a Wire Transfer Work?
When you notify your bank that you wish to send a wire to another party, it will likely ask you for the recipient's name, bank name, routing number, bank address, and, in some cases, the bank's SWIFT code if the transfer is being sent internationally.
Once your bank begins the process of sending the money to the recipient's bank, it creates a payment order, which is sent via one or more inter-bank networks to the recipient's bank. Once the recipient's bank accepts the payment order, the transfer is complete.
How Long Does a Wire Transfer Take to Complete?
If the recipient and the sender of the payment order are both using accounts within the same bank to make the wire transfer, then the transfer can happen almost immediately. The bank will simply adjust the book entry for each account, and the wire transfer is complete.
If the wire is being sent between two different domestic banks, it may take one or more days for the payment order to get from the originating bank to the recipient's bank. International wire transfers can take a few days to complete.
How to Reverse a Wire Transfer
Once the recipient's bank has accepted the payment order, the transfer cannot be reversed. If the originating bank sends a cancellation notice to the recipient bank, and the cancellation notice is received before the recipient bank accepts the payment order, the recipient bank will generally refuse the payment order.
Should you wish to reverse the wire transfer, you'll be racing the transfer network between the banks to get the cancellation notice to the recipient bank before the payment order is accepted.
Can a Transfer Be Reversed After Being Accepted?
Once a wire transfer has been accepted by the recipient's bank, there are only a few circumstances that allow for the reversal of the wire transfer under the Uniform Commercial Code.
The only available options for reversing a completed transfer are if the sending bank made a mistake, if the payment order was a duplicate of a previous order, or if the order is for an amount greater than the beneficiary was entitled to receive under the transfer. In those cases, the beneficiary's bank will recover the funds improperly paid to the beneficiary.
- Cornell University Law School Legal Information Institute: Uniform Commercial Code, Article 4A-Part 2
- The Swift Codes: SWIFT Code and BIC Codes for All Banks in the World
- Cornell University Law School Legal Information Institute: Uniform Commercial Code, Article 4A-Part 1
- Wells Fargo: Online Wires FAQ
Chris Baylor has been writing about various topics, focusing primarily on woodworking, since 2006. You can see his work in publications such as "Consumer's Digest," where he wrote the 2009 Best Buys for Power Tools and the 2013 Best Buys for Pressure Washers.