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How to Wire Money Safely

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

If you’ve ever had to wire money, you’re probably familiar with the jittery feeling: What if the money goes to the wrong person? What if someone steals my financial information? After all, a wire transfer occurs without physical contact between you and the recipient, and the transaction is irreversible.

Your concern is not groundless. Wire transfers are a fast, easy way to move money among individuals and businesses. But because of their speedy transaction times, they are also susceptible to fraud.

How do you wire money?

First, it’s important to know what a wire transfer is, how it works, and how it’s different from other types of electronic transfers.

A wire transfer is a direct, digital money transfer between two bank accounts, which does not need to be cleared by a third party. Because wire transfers are direct bank-to-bank transactions, they are faster than automated clearing house (ACH) transfers. Domestic wire transfers can be completed in as soon as one to two business days. But because they are faster, wire transfers are also more expensive than ACH transfers, which are usually free. Wire transfer fees vary by financial institution. The average fee for sending money via wire transfer ranges from $20 to $35, and for receiving money, the fee ranges from $10 to $20. You can also wire cash from alternative providers like Western Union and MoneyGram.

ACH transfers occur between financial institutions, and are conducted through a third-party clearinghouse. The banking system has utilized the ACH transfer method for more than four decades. Many forms of direct deposits and payments that you are familiar with — such as direct deposit paychecks sent by your employer and tax returns from the Internal Revenue Service — are made through ACH.

What information is required to wire money?

To set up a wire transfer at a bank, you will need to provide the recipient’s personal and bank account information:

  • Name
  • Account number
  • Bank routing number and SWIFT code (if needed)
  • Mailing address with city, region, country and postal ZIP code

Some banks have different routing numbers for different types of transactions. The routing number for direct deposits and ACH transfers might be different from the one used for wire transfers, for example. It is critical to find the right routing number for the type transaction you intend to make. If you’re not sure which routing number to use, you may contact your bank for help.

If you’re expecting to receive or send a wire transfer from or to an international account, you’ll need a Society for Worldwide Interbank Financial Telecommunication (SWIFT) code, which is used internationally to identify specific banks. It’s the international version of a routing number; and as with a routing number, you may find the SWIFT code on your bank’s website or by calling a bank’s branch location.

Safety tips to wire money

Now that you know how a wire transfer works, let’s talk about safety. A wire transfer is fast and immediate. Con artists often take advantage of its speediness and the fact that it’s irreversible. Wire transfers happen so fast, that it’s possible for a fraudster to seize money from your account before you even realize that it’s missing. So, it’s critical to stem your risk of wire transfer fraud.

Protect your information

Never give out your bank account, credit card numbers or social security number to advertisers or unsolicited calls; or to anyone via text message or email. Swindlers can get ahold of that information to steal money from your account via wire transfer. Make sure that your electronic devices, such as computers, phones and tablets are safe and that the internet you use is secure. This will reduce the risk of having your financial and personal information stolen.

NEVER wire money to anyone you don’t know

Don’t fall for enticing stories or work opportunities presented to you by strangers. If someone you don’t know asks you to wire money, think carefully about who is making the request.

Beware of common schemes

The Federal Deposit Insurance Corporation warns that common scammers’ baits include work-from-home offers, deals on products for sale, or news that you have won some kind of lottery. There also have been fraud cases where a victim received a check from a scammer (for something that the victim sold to the scammer, for instance). But the scammer wrote the check for more than the amount requested. The victim deposits it into his/her bank account. Then, because of the overpayment, the scammer asked the victim to wire a portion of the money (less than the check amount) to someone else, maybe in another country. In the end, the victim often finds out much later, when the check bounces, that it was a scam and they are responsible for the entire amount.

Be wary of cash wire transfers

Problems that arise from wire transfers are often related to cash wire transfers, like the ones people make via Western Union or MoneyGram. These companies do not verify the identity of either the sender or recipient. So, fraudsters with false identities can easily swoop in to collect money on the other end.

Carefully check the information you put on a wire transfer

One typo could result in money being sent to the wrong person or business.

Check your bank statements regularly

Keep an eye on your bank statements. If there’s a suspicious transaction, inform your bank as soon as possible.

If you have been scammed, file a report

File a complaint with the Federal Trade Commission online or call 1-877-FTC-HELP if you think you may have wired money to a scammer.

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Banking

What Is APY and How Is It Calculated?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

What is APY and how is it calculated?
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When looking for a new savings account, do you find yourself confused by the terms, “APY” and “interest rate”? Well, they both have something to do with interest, but they’re calculated differently. Most deposit accounts that pay interest use APY.

Interest rate simply refers to a numerical value (like 1%, 2%, 3%). It is the rate, or percentage, of your original deposit (principal) that the bank pays you in order to hold your money with them.

Annual percentage yield (APY) gives a clearer picture of how much money you can make from your certificate of deposit, savings or money market account than interest rate alone. This is because APY factors in how often the interest is compounded (that is, combined with the principal) over a time period — annually, quarterly, monthly and so on.

Understanding interest and APY

Interest rate

Interest rate and APY are powerful tools. You may be surprised by how much money can accumulate over time — that’s why many experts encourage people to save early. If, instead of withdrawing your earned interest, you let it stay in your savings account, then the interest is calculated on the entire balance, not just on your principal. So as time goes by, you are earning interest on an increasingly bigger pile of money.

Scenario one

If you deposit $100,000 into a savings account that pays 2% interest annually, you will earn $2,000 a year later. When year two starts, your balance will be $102,000. Now, the same 2% interest rate applies to your account, but you will be earning interest on a larger amount — your principal plus the interest you earned during the first year. So, by the end of the second year, your earned interest will be $2,040 — $102,000 x 2% = $2,040, for a balance of $104,040.

If, as in the example above, interest is compounded once per year, then the APY and interest rate are identical — 2%.

Interest plus compounding — APY

However, in practice most banks offer more frequent compounding cycles — quarterly, monthly, weekly or even daily. With daily compounding, for example, your principal amount increases each day as interest is added to it. As a result, your net return is higher.

Scenario two

Let’s take the same $100,000 from the example above and show the APY using compounded interest on a daily, instead of yearly, basis. If the 2% interest on that $100,000 investment compounds daily, then the APY is 2.0201% instead of 2%.

So at the end of the first year, you will have earned $2020 in interest instead of the $2000 that you earned with annual compounding — $100,000 x 2.0201% = $2020, for a balance of $102,020. And at the end of the second year, you will have earned $2060 in interest — $102,020 x 2.0201% = $2060, for a balance of $104,080.

Confused? Not to worry. We just want you to see that the second scenario would earn you more interest than would the first scenario. The key takeaway is that the more frequent the compounding cycle, the more return you can expect by the end of the same time period — that’s why APY matters.

How to calculate APY

We know that this can be baffling for all you non-math geeks! The good news is that most banks provide you with an APY, which saves you the headache of calculating it on your own.

But for those comfortable calculating APY themselves, there are many online calculators that you can use. For example, DepositAccounts.com’s compound interest calculator can help you figure out how much interest you will eventually earn on your investments over certain times. (DepositAccounts.com is a subsidiary of LendingTree.)

And if you’re curious to know exactly how an APY is calculated, you may find the mathematical formula on the Federal Deposit Insurance Corporation’s website.

If you want see how the math works out, here’s the actual formula you can use to calculate APY:

APY = 100*[(1 + (interest rate/compounding cycles)^compounding cycles)) – 1]

Compounding cycles is the number of times a year your interest compounds.

Now if the 2% interest on that investment of $10,000 compounds daily (365 times of a year), at the end of the year, you will earn $202.01 in interest on that deposit.

In this case, the APY is 2.0201%.

Here is how we arrived at the result:

APY = 100 * [(1 + (.02/365) ^ 365) – 1]

APY = 2.0201%

The deposit compounds monthly, meaning it has 12 compound cycles:

APY = 100 * [(1 + (.02/12) ^ 12) – 1] = 2.0184%

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Banking

Where Is The Account Number on a Check and What Is It For?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Roth 401K vs 401k
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Even though paper checks are not as ubiquitous today as they were in the past, the information that financial institutions need to facilitate a transaction between two accounts is the same, whether the transfer is initiated electronically or via check: a specific account number, along with a routing number and other information.

The account number is a unique identifier for your personal bank account. It tells the bank exactly which account to take money from and which one it goes to.

It is important to identify your account number before setting up electronic activity like online purchases, wire transfers or direct deposits. Failure to provide the correct account number could result in delayed or missing paychecks or payments on your monthly bills, such as rent, mortgages or student loans.

4 ways to find your account number

Find your account number on a check

Find your account number on a check

The easiest way to find your account number is to look at your checks. An account number typically is located at the bottom of a check. It’s the second group of numbers from the left, next to your nine-digit routing number. Banks have varying amounts of digits in the account numbers (as many as 12 digits) they assign to their customers.

Find it on your bank statement

If you don’t have a check, you may find your account number on your monthly bank statement. Look at the top of the document for a series of numbers labeled “account number.”

Find it through online banking

You also may look up your account number by signing into your online banking account via a mobile banking app or desktop computer.

If you have a savings account and a checking account at the same bank, you likely will have two different account numbers — one for each account. It’s important to know which account you intend to use for a given transaction before looking for the account number.

Make sure that you have a secure internet access when accessing financial information like this. It is never a great idea to conduct online banking via Wi-Fi at a coffee shop!

Call your bank

If you still can’t find your account number, call your bank’s customer service department, or visit a local branch to ask for help in looking up your bank account.

Important to note

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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