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Banking

What Is a Wire Transfer?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

There are plenty of reasons you might need to send money from your bank account, and a wire transfer can be an easy way to get the job done. They’re speedy, convenient and can help you make large payments — such as putting a down payment on a home or helping a sick relative with medical expenses — on short notice.

What is a wire transfer?

A wire transfer is the process of sending money to someone, either domestically or internationally, from one bank or credit union to another through their secure systems. Those internal systems include services like SWIFT or Fedwire, but today, wire transfers can also be sent by alternative providers, such as Western Union, TransferWise and MoneyGram.

Completing a wire transfer is pretty straightforward, but there are some key pieces of info you need in order to send one:

  • Your recipient’s full name and address
  • Your recipient’s bank account number and bank routing number
  • The amount you want to wire

Some banks might also require a specific code to identify where you’re sending your money. The type of code you use — including SWIFT codes, BIC codes or IBAN codes — will vary depending on the bank and whether the money is being sent internationally.

Many banks and credit unions allow you to send wire transfers through your account online, while others require that you come in and fill out paperwork. Once all the documents are filled out, the bank will charge you a fee for the service (more on that below) and your money will be on its way.

How long does a wire transfer take?

How long it takes to complete a wire transfer depends on a few factors. Domestic wire transfers are typically sent the same day, but it also depends on how the recipient is receiving the money.

For example, if the recipient chooses to receive the funds at a Western Union location, they may be able to get the wire transfer in just a few hours. Meanwhile, a domestic bank-to-bank wire transfer can take one to two business days.

Sending an international transfer can take several days, depending on your bank and the receiving country’s processing system. To find out exactly how long an international wire transfer will take, check with your specific bank or credit union.

There are also some speed bumps worth watching out for — especially when it comes to international transfers.

  • Western Union’s rules state that funds may be delayed or services rendered unavailable based on the amount sent, the destination country, currency availability, identification requirements and differences in time zones, among other complications.
  • Chase’s Global Transfer stipulates that they process wire transfers through their own internal review process, and they may contact the sender to verify their request. That could delay the wire transfer.

As a result, an international wire transfer could take a few days to show up in the recipient’s account. It may not be an instant transfer, but it’s usually faster than mailing a check.

How much does a wire transfer cost?

The fee for sending a wire transfer varies based on the amount you’re sending, whether you’re using your bank or an alternative provider like Western Union and whether the transfer is domestic or international.

Domestic wire transfers cost $4 at Walmart, which uses the cash transfer service MoneyGram. At some banks and financial services companies, those fees can be a lot higher: Ally charges $20, while Wells Fargo charges $30.

International wire transfers are typically a lot more costly. Banks typically charge about 5% on the daily exchange rate in addition to hefty international money transfer fees, so a $10,000 transfer could cost you up to $500 in fees to your bank, plus other fees.

Some banks and credit unions do not charge a wire transfer fee to their account holders, but there might be stipulations. For example, Chase Global Transfer does not charge a wire fee if their account holder is sending an online wire of $5,000 or more to a bank outside the U.S. in foreign currency.

Keep in mind, too, that you can send a wire transfer through such services as Western Union or TransferWise using money from your credit card, but your credit card company considers wire transfers a cash advance and may charge you cash advance fees and higher interest rates. That’s in addition to the fees you will be charged from whichever service you use.

Are wire transfers safe?

Wire transfers are generally considered to be secure, but there is one major issue to keep in mind: Once you’ve sent the money, you can’t get it back.

Hopefully you’ve never fallen for the “You won a trip, now wire us a deposit to hold your spot!” scam and you’re always sending your wire transfer to someone you know and trust, but there are also more convincing wire transfer scams out there.

Fraudulent schemes include one where you’ve been told that you won a jackpot and need to secure your money, and another where Facebook scammers pose as your friends, messaging you that they’re in trouble and financial help. Always double-check in these situations.

Additionally, the Consumer Financial Protection Bureau (CFPB) has issued rules to protect consumers who send money electronically—typically over $15—to foreign countries. It won’t cover every situation, so you should still be careful who you are sending money to, but it does provide some protection.

For example, CFPB rules generally require that banks and wire transfer companies disclose the exchange rates and fees that are collected by the company—as well as information on when the funds will be available to the consumer—before you send your money.

If there are any problems, the rules also state that consumers have 30 minutes (and sometimes more) to cancel a transfer. The CFPB also requires companies to investigate if a consumer has a problem or claims that their money has not arrived.

Sending a wire transfer safely is all about staying vigilant and aware. Here are a few tips to keep your money safe from fraud:

  • Always know the person or business you’re sending money to.
  • If your friend messages you on social media that they are in trouble and need money, take caution. Ask them a question only they would know the answer to, or ask for some other proof of identification.
  • If you are purchasing a home and receive a phone call from a settlement company to send money in order to close, verify that information with your mortgage broker before sending a dime.
  • Do your due diligence: Make sure the items you purchase and the person you purchase them from are legit.

What are the alternatives to wire transfers?

If a wire transfer doesn’t seem like the best option for you, there are some other options available. Here are some of the alternatives to consider:

  • P2P payment apps: There are plenty of peer-to-peer (P2P) payment apps used widely by consumers today, including services such as PayPal and Zelle, or mobile apps such as Venmo and Cash App. These services come with their own potential fees, and may limit how much you can send — that being said, they’re convenient to use and even allow you to pay multiple parties at once.
  • ACH transfers: Automated Clearing House (ACH) transfers are often used for “direct deposit” payments, such as when you receive your paycheck electronically or pay your credit card bill online. These transfers are pretty similar to wire transfers, but with some different limitations: For example, you cannot use third-party services like TransferWise with ACH payments, and there often some restrictions on the amount you can send.
  • Joint bank accounts: If you’re regularly sending money to a family member or spouse, it may be worth opening a joint bank account together. That way, you can both withdraw and deposit from a shared source of funds.

So is a wire transfer is your best way of sending money? That depends on where the funds are going, how much you’re sending and how quickly you need it to get there. Above all, it’s important to know your options — and potential security risks — before sending money in any form.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Everything You Need to Know About ChexSystems

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Most people know they have a credit score and credit report that lenders use to decide if and how you can borrow money. But did you know that banks and credit unions have their own method of determining if you’ll be a good customer? Enter ChexSystems, a reporting system that tracks all of your closed checking and savings accounts. Even though many consumers haven’t heard of the agency, its reports could have a massive effect on your ability to open a new bank account.

What is ChexSystems and what does it do?

The information that ChexSystems tracks is used to create your Fair and Accurate Credit Transaction Act (FACTA) report. Think of this as a banking-specific version of your credit report.

When you apply for a new checking account or savings account, the financial institution will often run your ChexSystems report to see if you have any negative marks. These can include overdrawn accounts, negative balances, closed accounts and more, all of which typically stay on your report for five years. Basically, banks check these reports to assess how much of a risk they’re taking by doing business with you.

“[Banks] want to know that if someone’s going to open an account with them that they’ll keep the account in good standing,” said Alexandra Cisneros, an education specialist at GreenPath Financial Wellness.

There are a few ways that ChexSystems helps banks do that. First, there’s your “risk score” — also known as your consumer score — that the agency calculates based on your prior credit behavior. Scores range from 100 to 899, and just like with your credit score, a higher number means you present a lower risk.

ChexSystems also generates a Consumer Disclosure report, which shows specific details about your credit history. The report might list past issues, such as unpaid account fees, overdrafts, bounced checks or even suspected fraud.

How many banks use ChexSystems?

Around 80% of all banks use ChexSystems, according to Banks.org. Cisneros said that nearly every major bank and credit union she has encountered does look at the agency’s reports, but there are some options in case you end up with negative marks or a low score.

Many banks offer “second chance” accounts, which specifically help people with less-than-perfect financial histories. These bank accounts might come with limitations or extra fees, but they can be a great workaround if you’ve received a poor ChexSystems report. Read on for more information on this option.

Why do I have a ChexSystems report?

There are plenty of reasons you may have a ChexSystems report, some of which might come from issues completely beyond your knowledge.

“The way people usually come to realize that they are having an experience with ChexSystems is when they apply for a checking account and find that they have a file,” Cisneros said.

Overdrafting is the most common occurrence that Cisneros sees, but there are plenty of other problems that might pop up. Here are the most common examples, which are broken down in detail below.

1. Not paying account fees

When you overdraw your account, your bank will usually charge you a fee. Overdraft fees can be as high as $35 at some banks, but as of March 2017, the national median was $30, according to research firm Moebs Services.

Even if you’re only overdrawn for one day, you can end up owing significantly more than that if you continue to spend money before you realize the account is overdrawn. It can be difficult to repay these fees, especially if you can’t afford to bring your account current.

However, if you end up closing the account with a negative balance or if the bank decides to close the account for you, ChexSystems will list this on your report. This is one of the most common reasons that a bank or credit union will deny your application, since your report reflects that you might struggle to pay your debts.

If you do get a fee on your account, call your bank as soon as possible. Sometimes the bank will waive (or reduce) fees for good customers. At the very least, ignoring the problem won’t make it go away and can cause you to get a negative mark on your ChexSystems report. Usually banks will give you a deadline to pay your fees before closing your account and reporting it to ChexSystems.

2. Overdrafting on your account

Even if you pay your overdraft fees when you go over your account balance, you can still be denied a new account if ChexSystems shows that you overdraw too often.

Here are some safeguards that you can set up to prevent overdrafts:

  • Keep all of your money in one account that you use solely for daily transactions.
  • Allow your bank to decline purchases if you don’t have enough available funds (which may mean declining to enroll in overdraft protection).
  • Use caution when opting for overdraft protection. With this service, banks will allow transactions to go through even if you have insufficient funds, but they will almost always hit you with overdraft fees at the same time.
  • Avoid using checks, which may be cashed at a later date.
  • Set up bank alerts so you’re notified if your balance dips below a certain amount.

3. Writing bounced checks

A bounced check is when you write a check for an amount that you don’t currently have in your account. When the recipient tries to deposit the check, the bank will reject it and charge you a fee for insufficient funds.

If you have any bounced checks that have been reported by retailers, it will show up in your ChexSystems report, which could cause you to be denied for a new account. Bouncing checks makes it seem like you’re not on top of your finances, especially if it continues to happen over a long period of time.

4. Committing fraud

It’s one thing to write a check for $100 and assume you have $100 in your bank account, only to have that check bounce. But it’s quite another to write a check knowing that you don’t have the funds in your account.

That constitutes fraud, and it’s a serious offense that can result in criminal action. Other types of fraud include opening an account with someone else’s information, and trying to write a check to yourself from another person’s account. Instances of fraud will show up on your ChexSystems report.

How long do ChexSystems reports last?

ChexSystems keeps records for five years, meaning you’ll have to wait that long for any negative marks to come off your report. However, if you find incorrect information, you can dispute it and ask for it to be removed.

You can also freeze your ChexSystems report. Like a credit report freeze, you can freeze your ChexSystems report so no bank or credit union can view it. This could block someone from stealing your identity and opening a new account in your name. However, it can also make it more difficult for you to open a new checking or savings account.

How can you clean up your ChexSystems report?

The first step to cleaning up your ChexSystems report is to take a look at what’s in it. According to Cisneros, this “investigation” phase is often the hardest step for consumers, but it can make all the difference in clearing your record.

“Know your options and what will happen — being aware of that can be the most empowering thing,” Cisneros said.

Getting your ChexSystems report

To get your free ChexSystems report, go to www.chexsystems.com and click on “Free FACTA Report.” As with a credit report, you’re legally entitled to one free copy of your report every 12 months.

However, unlike with your credit report, which you can access online after answering a series of questions, you have to wait for your ChexSystems report to be sent to you by mail. You should receive the report within five business days after submitting your application.

Submitting a dispute

From there, you can dispute any errors or mistakes you might see on your report. To do that, you can submit a form via this website, by fax at 602-659-2197 or by mail at the following address:

ChexSystems Inc.
Attn: Consumer Relations
7805 Hudson Road, Suite 100
Woodbury, MN 55125

ChexSystems recommends that you include the following information when you submit your dispute:

  • Full name
  • Social Security number
  • Current mailing address
  • ChexSystems consumer ID number, if available
  • The information you are disputing, as well as any information regarding the nature of your dispute

It usually takes 30 days for the investigation to be finalized, and the results will be mailed to you.

What are the alternatives to a checking account?

Thankfully, consumers with negative ChexSystems reports do have a few alternatives at their disposal. If you’re having trouble opening a checking account, here are two of the easiest workarounds.

Second chance bank accounts

Again, second chance bank accounts offer you the chance to open a bank account despite having an imperfect financial record — albeit with a few limitations and possible fees. There are plenty of great options available, many of which also offer you a road to a standard, fully equipped account.

For example, Radius Bank, which is available to consumers nationwide, offers an easy-to-open second chance account that comes with a free debit card, 24/7 banking access and the ability to upgrade to a more premium account after 12 months of good credit history. There are a few fees to watch out for, though.

Another option is the app Chime, which offers bank accounts without checking applicants on ChexSystems. As an added perk, the account is mostly fee-free, with no monthly charges, ACH transfer fees, foreign transaction fees or ATM fees.

Additionally, other major banks like Wells Fargo and BBVA Compass also have options for people with less-than-ideal ChexSystems reports.

For more info on second chance accounts, here’s our list of some of the best options available. If you already have a bank in mind, call them and ask what information they use to verify new accounts. Not all banks use ChexSystems; some use other systems like Early Warning System or Telecheck.

Prepaid debit cards

A prepaid card works like a gift card. You load it with money and then use it wherever cards are accepted. You can send money with your prepaid card, pay bills online and set up direct deposit. In many ways, it acts like a debit card that you’d get with a checking account.

There are plenty of options when it comes to prepaid cards, with many major financial institutions offering their own deals. For example, the American Express Bluebird card allows customers to add between $1 and $1,999, with accounts that cost as little as nothing to open. Meanwhile, the Navy Federal Credit Union’s GO Prepaid Card doesn’t charge any fees for use or activation, but it does require that you deposit at least $20 in order to open an account.

However, there are downsides to these cards, mostly fees. Some prepaid cards charge a fee for buying the card, while others have a monthly fee. They can also charge every time you withdraw money or reload the card. If you use the card often, you can face high fees every month that cut into your ability to save money and improve your finances. In our review of the AccountNow Gold Visa Prepaid Debit Card, for example, we found that consumers could spend more than $100 in fees per year just to maintain the card.

Still, a prepaid debit card is one alternative to consider if you have a negative ChexSystems report. And if your report is stopping you from opening a new checking or savings account, remember that there are also steps you can take to clean up your ChexSystems report.

The information in this article is accurate as of the date of publishing.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Banking

What Are Socially Responsible Banks and How Do They Work?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Socially responsible banks are financial institutions that allow their customers to manage their money while supporting a cause that matters to them. If you’d like to make a difference in the world, one way to start is with your bank account.

Working to fight climate change? A 2019 study found that banks worldwide had poured $1.9 trillion into financing fossil fuels since the Paris Climate Accord was adopted in 2015. Looking to support local businesses? A 2017 analysis found that most major banks grant less than one small business loan per branch each year. If fighting climate change and supporting local businesses are values that are important to you, you might want to understand what your bank is doing to help on either front.

Before you consider changing to a socially responsible bank, it’s worth understanding exactly how these institutions work, how to find them and how they can help your wallet. Here’s everything you need to know about socially responsible banks.

What are socially responsible banks?

Traditional banks aim to maximize profits for their shareholders. Socially responsible banks are values-based institutions that are focused on lending to ethically minded businesses and individuals — in addition to turning a profit.

Here’s what that looks like in practice. Nearly all banks use the money in their customers’ checking and savings accounts to grant loans and make investments. Usually, consumers have zero control over who receives that money.

Socially responsible banks ensure that the money in your accounts is lent to specific ethical, environmental or politically minded groups.

There are countless ways to make your money count. There are banks focused on funding clean energy, combating poverty, funding minority-owned businesses, donating to political parties, supporting religious groups and more.

If there’s a cause you care about, there’s probably a financial institution that can help you support it.

“It’s really about figuring out what’s important to you as a consumer, and then finding a bank that matches your values,” Becca Hoeft, the chief brand officer for the Sunrise Banks, a socially responsible financial group based in Minnesota, said.

The benefits of choosing a socially responsible bank

Every bank has its pros and cons, but switching to a socially responsible institution could have a major impact on your daily life and your wallet. Here are a few of the biggest advantages.

Your money will support the causes you believe in

This is the most obvious advantage, as you can pick a bank that will invest your dollars into something you truly care about. It’s an experience that allows everyday people to enact major changes, according to Morgan Simon, a financial expert and author of Real Impact: The New Economics of Social Change.

“Even if we are not particularly wealthy, we’re all connected to these webs of wealth, and we’re able to influence it,” Simon said. “We may only get to vote every four years, but you can vote every day with your dollar.”

You may get higher rates and lower fees

Socially responsible banking isn’t just about values, though. Many institutions also offer ways to save money, including lower fees and higher interest rates than some of the big banks.

For example, Wells Fargo, and Citi offer less than 0.05% annual percentage yield on standard checking accounts, and all three charge between a $10 to $15 monthly fee. Meanwhile, many of the major socially responsible banks offer free checking accounts, and some provide up to 1% APY.

Still, that’s not true for every single bank, and it’s worth comparing rates and fees for both checking and savings accounts before making a decision.

It may help you spend more responsibly

Socially responsible banks will also help you spend money more wisely — and, if you want, more ethically. Offers differ between banks, but here are a few examples:

  • New York-based Amalgamated Bank will match half of the interest you earn from deposits, then donate it to the charity of your choosing.
  • Aspiration, based in California, will track all of your spending with an “impact measurement” that tells you how much your purchases affect the environment and other factors.
  • Sunrise Banks allows you to dedicate your account funds specifically toward developments in your local community.

You’ll connect with people who share your values

Because socially responsible banks are based on interests and beliefs, they’re also a chance to connect with people who share your values. Hoeft noted that this can be one of the biggest benefits of working with an ethically focused institution.

“Banking is pretty boring,” Hoeft said. “It’s not a sexy business. But when you look at these banks who are trying to make a difference because they see a problem — there’s a sense of community that occurs.”

How to find a socially responsible bank

So how do you know which banks are for real? There are a number of affiliations that tell you whether a financial institution is worth considering — and help you understand their principles.

  • Community Development Financial Institutions (CDFI): For Simon, this is where anyone looking for a socially responsible bank should start their search. CDFIs are institutions that focus specifically on revitalizing low-income communities around the United States. Each bank must meet a set of standards to become eligible, including maintaining corporate accountability and commitment to financial development in its community.
  • B Corporations: These are businesses around the world that meet a specific set of values laid out by the “B Corp Declaration of Independence.” Companies that receive this certification must value social and environmental advocacy, as well as public transparency. The group’s website even has a directory where you can search for B Corps that match your interests.
  • The Global Alliance for Banking on Values (GABV): There are only 55 GABV members worldwide, and just eight in the U.S. That’s because in order to join, a bank’s values must meet the alliance’s set of key principles — including its “triple bottom line” approach, which emphasizes human welfare and the environment in addition to profit.
  • The Paris Climate Agreement: Some environmentally focused banks, including Sunrise and Amalgamated, have also committed to abide by the 2015 Paris Agreement. The central goal of the agreement aims to limit the rise in global temperatures by promoting green energy and reducing the use of fossil fuels.

What are some popular socially responsible banks?

  • Amalgamated Bank: One of the largest and best-known socially responsible banks, Amalgamated has more than $4.5 billion in total assets. The New York-based financial group is majority-owned by a workers union but also prioritizes a range of other issues such as women’s rights, immigrants’ rights and the environment.
  • Aspiration Bank: Based in California but focused specifically on online banking, Aspiration describes its mission as helping customers “make money while making the world a better place.” In practice, that means fossil fuel-free bank accounts, donating 10% of its invested money to charity and offering bonus rewards for customers who shop at socially conscious companies.
  • Southern Bancorp: With more than 80,000 customers, Southern Bancorp is one of the South’s largest socially responsible banks. The company is both a GABV member and an CDFI-certified institution, and its contributions are focused mainly on rural community development.
  • Thrivent: A not-for-profit financial service provider with a Christian focus, Thrivent is an option for those looking to bank ethically while also supporting their religious values. It’s also a massive organization: Thrivent has more than 2 million members and in 2018, the group made the Fortune 500 list.
  • Sunrise Banks: Hoeft described Sunrise’s mission as “empowering financial wellness for everyone,” and the bank works toward that in a number of ways. The company is a certified B Corporation and part of the GABV, in addition to aligning its investments with the Paris Climate Agreement.

The bottom line: Should I use a socially responsible bank?

There are plenty of ways to make an impact with your money, but socially responsible banks can be an easy and empowering option to express your values. Still, it’s worth exploring all of your options — both ethical and financial — before committing to a new bank.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.