Looking for a Payment Method Accepted by the Majority of Forex Brokers? Read our Guide to Bank Wire Forex Brokers
When you first start trading Forex there are a number of considerations you have to compare. And picking the right one can often be rather difficult. You may already have a number of preferences such as MetaTrader 4 as a trading platform, and foreign currencies as the trading instrument of choice. But what about payment methods? You may decide to start your trading experience by opening a demo account but eventually you’re going to need a live trading account and be looking for the best way to fund it. There are a number of different payment methods to use, and most brokers offer a good selection. You will, however, find that some options may be limited. If you’re looking for a payment method accepted by a large percentage of Forex brokers you’ll need to consider bank wire transfers.
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What is a bank wire?
A large number of you reading this won’t be requiring an explanation, but we’re going to continue because there are bound to be a few of you who would like the concept explained. Also known as a bank transfer or credit transfer it is a way to transfer funds electronically from one person to another. It can either be made from one bank account to another or with a transfer of cash at a cash office. There are a number of different wire transfer systems and operators will provide a range of options with regards cost, value, volume as well as length of time and finality of settlement.
How does a bank wire work?
A person wanting to transfer money gets in touch with a bank and makes an order to transfer a certain amount of money. The information needed in order to effect the transfer will be IBAN and BIC codes. A message is transmitted by the bank, examples being SWIFT or Fedwire, to the recipient bank, giving a number of different instructions to effect payment. This message will also include settlement instructions. Payment is not instantaneous and can take anything from a few hours to several days. Banks that are involved in the transaction collect a fee for the service from the sender and the recipient. There may also be a number of other charges made if the services of an intermediary bank are needed.
A brief history of wire transfers
If you decide to use one of the best bank wire Forex brokers you can be sure you’re using a payment method that has been around for more than a century. The first widely used wire transfer service was started by Western Union in 1872. It made use of its existing telegraph network, and with the help of passwords and code books for security a telegraph operator was able to ‘wire’ money from one office to another where it was available for the receiving customer to withdraw. In the space of just five years, it was being used to transfer nearly $2.5 million every year.
Forex brokers accepting bank wire – How secure is this payment method?
Rather than just considering how secure bank wire Forex brokers are we’ll take a look at security in a more general way, because we appreciate there may well be a need to use bank wires on a number of different occasions.
Using a bank-to-bank wire transfer, as is the case with Forex brokers accepting bank wire transfers, each account holder must have proven identity. It is possible to recall a bank wire but chargeback is unlikely. The information contained in a bank wire is transmitted securely via a method of encrypted communication. The cost of sending a bank wire varies considerably, depending on the bank and location. In some countries the cost can be very high.
If wire transfers are made through a cash office it can be an almost completely anonymous transaction, and is really only best for people who know and trust each other. If you are thinking of sending money for an unknown person to collect at a cash office it is not advisable. The unknown person could collect the cash and then not provide the goods or services being paid for. A scam which has been used to great success in the past.
IBAN or SWIFT transfers are not completely trouble free. They can often involve a number of intermediary banks that can take their own fee directly out of the wire payment, without the payers knowledge or consent. In a lot of cases there are no rules or regulations to stop this from happening. There is a small amount of protection available in Europe because European intermediary banks are prohibited from taking such a fee, even when the transfer is transatlantic.
Different types of bank wire available
One of the biggest providers of bank wire services is currently Western Union. It is even possible to transfer or receive money without having an account with any financial institution. Western Union does keep details relating to senders and receivers but some transactions can still be done almost anonymously. A number of other companies also provide retail money transfers such as ACE Money Transfer, MoneyGram, VFX Financial PLC, Transferwise, and RIA Financial Services.
International bank wires are generally executed through SWIFT. This is a global network founded in 1974 by seven international banks. It involves sending financial messages and exchanging data that enables the transfer of funds between institutions. The headquarters of SWIFT are in Brussels, Belgium. SWIFT is also a UN-sanctioned international standards body relating to the creation and maintenance of financial-messaging standards. Payments initiated through SWIFT involve a BIC (Bank Identifier Code) or SWIFT Code that are usually eight digits long. Every financial institution is given its own unique code that will identify the bank, its country and city. Adding three extra digits will enable the funds to be directed to a specific office.
In the United States, banks use SWIFT to notify banks in other countries of a payment. The payment is then made using the CHIPS or Fedwire system. Domestic payments between banks are made using the Fedwire system, which makes use of the Federal Reserve System.
What to look for in the best bank wire Forex brokers
There is only really one disadvantage with choosing bank wires for your Forex trading payment. They can take much longer than most other payment methods, sometimes as long as seven business days. Weekends and public holidays can often get in the way which in the fast paced world of Forex trading can be very frustrating. However, it is still a very safe and secure payment method and for some of you it may be the only choice. So what should you consider when trying to find the best Forex brokers accepting bank wire transfers?
- Quick turnaround times
- Seamless transactions
- Payments available in a range of currencies
- No fees for withdrawals
Provided you can find a bank wire Forex broker that can meet the above stipulations you should have no problems using bank wire transfers for making deposits and withdrawals. As long as you remember to allow plenty of time for the payment to be processed.