Transferring money between bank accounts can be an expensive endeavor, costing you as much as $30 to send $1,000 from one institution to another in some cases. So why do banks charge such high fees? Let’s take a look at the cost of moving money from bank to bank and why it costs so much in the first place. In this guide, we’ll let you know why do banks charge transfer fees?
What Are Wire Transfers and How Do They Work?
Wire transfers are payments made from one bank account to another. There are a few different types, but they all function similarly: The sending bank will debit your account and then credit another bank’s account.
Since wire transfers charge a fee each time we send them, it’s best to save them for when you need them. Of course, you should never transfer money from bank to bank because you want your account in one place rather than another.
How Do Banks Make Money Off of Wire Transfers?
In short, banks make money off wire transfers through fees. The fee is a percentage of how much money you’re moving around. But what’s even worse, many banks do not warn customers about these fees until after they send their wire transfer through.
Each bank sets the fees associated with sending and receiving wire transfers. Those fees, however, are regulated by federal law. For example, according to the experts at SoFi, “The Federal Reserve Board outlines a $10 maximum fee for incoming domestic wires and a $15 maximum fee for outgoing domestic wires applied to banks with more than $1 billion in assets and other non-exempt institutions.” Other banks like SoFI Invest (SoFi Bank) offer better benefits to their customers.
Different Types of Transfer Fees
Wire transfers often move money over national borders. They are also popular with investors who need to shift significant sums around, such as hedge funds and other financial institutions. Whatever your reasons for wanting to transfer money from bank to bank, you’ll likely to pay one of these types of fees:
- The Originating Bank’s Fee
Many banks will charge a flat fee for any transfer, regardless of how much money is being moved. For example, the Bankrate survey found that, on average, consumers pay $10 to send $1,000 from one bank to another using an electronic transfer method such as Automated Clearing House (ACH) or wire transfer.
- The Receiving Bank’s Fee
In addition to fees charged by your bank, you may be charged a separate fee by your recipient’s financial institution when you move money into their account. Read more about How Does a Lender Calculate the Interest Rate of a Car Loan?
- Currency Conversion Fee
If you send money overseas, you may be charged additional fees for currency conversion depending on which country you are sending funds to and which currency you use in your home country.
When it comes to transferring money between accounts, banks and other financial institutions have a variety of charges that may apply. These include currency exchange rates (i.e., when converting from US dollars to British pounds) and transfer fees.
How to Avoid Transfer Fees
Banks may charge a transfer fee when you move money between your accounts with certain banking services, like debit cards and bill pay. However, you can use some bank strategies to avoid these fees. For example, there is no fee if you transfer money to another bank that belongs to the same financial institution. Many banks charge money when you transfer money between accounts. Don’t worry, though, because these fees are almost always less than you think.