How Money Transfers Work

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A money transfer involves the transmission of money from a particular account at a bank or savings to another account at the same or another bank. The account holder’s bank issues the order for a certain amount of money to be credited to beneficiary’s account.

This combines the payment orders and transfers information which includes the name and account number of the sender, account number of the recipient, bank of the receiving bank and information supplied by the customer about the intended use.

Bank money transfers are usually the quickest way to transfer money between bank accounts. The central bank shall forward this information through disk replacement procedures to the recipient banks (so-called clearing), charges the payments between the banks and posts the difference to the accounts of the credit institutions (settlement).

The banks involved in a transfer update records using the transmitted account information of its customers on the one hand and their deposits with the central bank on the other. I

f the basis of the comparison of data transfer such as the total assets of the customers of a bank (the bank account on the liability side) decreases, the bank’s balance sheet as assets also decreases.

At the same time, the account information of customers needs to be updated in the appropriate manner, for example, through electronic banking or a bank statement. In some banks the updating is done in real time while other banks update only at the end of the day, thus increasing the duration of the transfer process.

A transfer between two accounts that are maintained at the same bank is technically different and often much faster. This information is transmitted not only to the central bank, but simply reclassified as the amount moving between the accounts.

Neither the assets of the financial institution at the central bank are changed by such an internal transfer nor the total balance of all customer accounts. For many banks, this is also displayed in real time, in order for the customer to access account information.

Transfers deadline is the beginning date of the contract, unless it is not a business day, otherwise the next business day. Many banks also offer the scheduled execution of a transaction, ie the assignment to a specific date.

The advantage of the transfer of money lies in the relatively simple handling of this type of payment in terms of location and time. Previously a large part of the transfers were implemented by means of paper (transfer form), the trend now leans more in the direction of online transactions via online banking.

This makes it easier for banks to continue payments and lowers maintenance costs, particularly personnel costs.

A disadvantage of the transfer is their return. Since November 2009, a revocation of the transfer is no longer possible once the transfer order of tenderer has been received by  the bank. In such a case, the client can only directly contact the receiver in combination. This is particularly problematic in the context of electronic commerce, furthermore, it is costly to trace a bad transfer.


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