As more businesses are operating globally, international money transfers have become the norm. This gave raise to an electronic payment method known as telegraphic transfer (TT).
If you’re looking for a safe way to send money across the border, you might want to consider using telegraphic transfer. Chances are you’ve done some transactions with this method before, but perhaps you’re not familiar with the term.
Read more to understand what telegraphic transfer is, how it works, and how you could make use of it.
What is a Telegraphic Transfer?
The term originated from how this type of transfer was conducted in the past. A messaging system known as “Tellex” would instruct the sending bank to transfer a specified amount to the receiving bank.
Each region refers to Telegraphic Transfer in different terms. Here are some examples:
- Telex transfer
- TT payments
- International wire transfer
- International money transfer
Now, telegraphic transfers use the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network for their messaging system, ensuring security and convenience, especially for cross-border transactions.
How Does Telegraphic Transfer Work?
Here are the steps for sending a telegraphic transfer:
- A transfer request is submitted by the sender to their bank for a specific amount via the recipient’s account. The sender should provide the recipient’s bank account details, such as the bank name, account number, and SWIFT code.
- After the sender’s bank transmits the transfer request to the SWIFT network, the request is routed to the recipient’s bank.
- The bank will process the payment to the recipient’s account after receiving the transfer request. The recipient bank may charge fees for processing transfers, depending on the amount, currency, and country of origin and destination.
Types of Telegraphic Transfers
Different types of telegraphic transfers are available, such as SWIFT and CHIPS.
SWIFT Telegraphic Transfer
SWIFT is a networking system between banks for international payments and settlements. It is a highly secure and dependable payment system that will encrypt every transaction with a set of codes for identifying the bank name, beneficiary country, and branch.
This standardized process streamlines financial communications, delivering higher velocity with every bank transfer to provide convenience. SWIFT is even used for fund transfers in countries that impose economic sanctions, namely Iran and Russia.
CHIPS Telegraphic Transfer
The Clearing House, a banking association in the United States, runs the CHIPS (Clearing House Interbank Payments System) payment system. CHIPS handles transfers and payments for substantial amounts between banks and financial institutions. For transactions with significant dollar values, CHIPS is frequently used.
CHIPS vs SWIFT: Which One Is Better?
It is crucial to take the currency of the transaction and the participating nations into account when deciding between SWIFT and CHIPS. While CHIPS is frequently utilized for high-value USD transactions between US banks, SWIFT is typically the preferred alternative for international transactions in non-USD currencies.
How to Initiate a Telegraphic Transfer
In order to process a telegraphic transfer, you must give your bank the following details:
- Beneficiary name and account number: These are the details of the person or business you are sending money to.
- Beneficiary bank details: The beneficiary bank’s name, address, and account number.
- SWIFT or CHIPS code: To identify the bank and guarantee that the money is moved to the right account.
- Amount and currency: The sum of money you wish to transfer as well as the chosen currency.
- Purpose of payment: The reason for the transfer (e.g. payment for goods or services).
- Your account details: Your account number, name, and address.
Your bank will process the telegraphic transfer and transfer the funds to the beneficiary’s bank after you have provided the information above.
Telegraphic Transfer Fees
The cost of sending a telegraphic transfer varies depending on the bank and the country you are sending money to. These costs may consist of:
- Outgoing telegraphic transfer fee: Your bank will charge you this fee in order to send the telegraphic transfer.
- Incoming telegraphic transfer fee: The beneficiary bank will charge this cost for receiving the telegraphic transfer.
- Correspondent bank fee: Each correspondent bank may impose a fee if the funds pass through one or more banks to send the money to the beneficiary.
- Foreign exchange fee: The bank may charge a fee for converting the funds into the required currency.
Before sending money, it’s critical to double-check the telegraphic transfer fees because they can add up quickly. Telegraphic transfers might also be subject to minimum and maximum limits set by some banks.
Telegraphic Transfer vs. Other Payment Methods
Telegraphic transfers are one of a number of available payment options for sending money abroad. Bank drafts and wire transactions are two more common approaches. Let’s compare these different types of transfers.
Telegraphic Transfer vs. Wire Transfer
Wire transfers and telegraphic transfers are identical as in both processes, money is transferred electronically between banks. Wire transfers, however, might not be as secure as telegraphic transfers and are frequently slower and more expensive.
Telegraphic Transfer vs. Bank Draft
Cashier’s checks, sometimes referred to as bank drafts, are a sort of paper-based payment mechanism that entails sending a check from one bank to another. Although they can be slow and expensive to process, bank drafts can be a safe and dependable method of payment.
Pay Internationally and Go Big with Peakflo
In conclusion, telegraphic transfers are a secure and efficient way to send money internationally. They involve electronically transferring funds between banks using a high standard messaging system known as SWIFT or CHIPS.
If you’re having problems with B2B payments, especially when transferring funds to international vendors, Peakflo can be your solution. Save up to 90% FX markup rate and pay your bills two times faster. Try out Peakflo today and see how you can transform your finance operations with us.