A telegraphic transfer refers to an electronic payment between two accounts and is often used for high-value and international transactions. In the UK, telegraphic transfers may also be referred to as ‘wire payments’.
Understanding telegraphic transfers
The term telegraphic transfer (TT) originates from when payment arrangements were agreed between banks using a telegram or telex. While technology has changed since then, the term telegraphic transfer is still used in the UK and some other parts of the world.
Steven Englander, CEO and Founder of business advisory service Accounts Direct, explains that ”the important difference between a telegraphic transfer payment and something like BACS is that it provides a tracked transfer that is suitable for international and high-value payments.”
How do telegraphic transfers work?
When you use your business account to make a TT payment, your funds will be passed from your bank to another bank. In the UK, TTs typically move between these banks as Clearing House Automated Payment System (CHAPS) payments.
Several international banks may be involved in the transaction. These banks will all be part of the Society for Worldwide Interbank Financial Telecommunications (SWIFT) network. Each bank involved in moving the funds will check the transaction and securely keep the money moving.
“The SWIFT network relies on trusted banks that have relationships with each other, which is why the process can be slower than other payment methods, and more expensive,” says Englander.
“Each bank will have its own process for checking the transfer and a fee for making those checks.”
How long does a telegraphic transfer take?
Because each bank in a wire transfer will check and process the payment securely, a TT payment takes longer than methods like a Direct Debit or card payment. TT payment times vary greatly.
“Some destinations and types of payments that are not in line with normal account activity might be subject to delay while the bank checks that the payment is legitimate," he says.
"That is important to protect businesses from fraud, especially when dealing with particular industries or markets where rates of fraud might be higher.”
However, generally speaking, most telegraphic transfers take anywhere between 1 to 5 working days. Telegraphic transfers can also be relatively expensive, especially for smaller or international payments. Alternatively, you might consider using a charge card. For example, with an American Express® Business Gold Card, you get the ability to pay suppliers instantly, while earning1Membership Rewards® point for every pound you spend¹. The Business Gold Card also offers more flexibility for your cash flow than a telegraphic transfer with its extended payment terms of up to 54 days².
How to send a telegraphic transfer
Sending TTs is usually simple if you have digital access to your company accounts. Jennifer Von Walderdorff is a consumer behaviour consultant; her company organises sustainable fashion shows on behalf of international clients.
“We often use wire transfers to make international payments” says Von Walderdorff. "We can use the online banking facility for our existing account to make an international payment using SWIFT, and it’s straightforward.”
When making a wire payment, the bank requires more information than for a domestic BACS payment, so businesses might need to provide:
- Their bank account details.
- The recipient’s bank, name, address, and contact number.
- The recipient’s IBAN or SWIFT code.
With this information, you should be able to make a TT payment from your business account, although in some cases you might need to visit a branch, particularly if it's a high-value payment.
Telegraphic transfer fees and charges
When making a TT payment, you should expect to pay fees that cover the charges made by each bank involved in the transaction. These fees are charged because of costs related to processing by the sender’s bank, the recipient’s bank, intermediary banks, and any costs related to currency conversion.
Often the fee is fixed rather than being related to the amount being sold, says Englander. “Typically you might expect to pay between £35 and £50 for a wire transfer, whether you’re sending £1,000 or £100,000,” he says.
Telegraphic transfers vs. charge cards
Weighing up whether your business should use telegraphic transfers or a charge card may depend on the size, scale and type of business you own:
Transaction speed: The first thing to consider is how quickly your payment needs to arrive. Using a credit or charge card provides immediate payment, whereas a telegraphic transfer could take up to five days.
Cash flow: When you make a TT payment, the money leaves your business as soon as the transaction is made. However, some charge cards provide favourable payment terms for your business. For example, the American Express Business Gold Card offers payment terms of up to 54 days, which puts more flexibility in your ability to manage cash flow.
Cost: TT payments can be costly, and your business needs to pay the fees associated with each transaction. With a charge card, you’ll typically pay an annual fee, but you’re then free to make as many transactions as required.
Rewards: With an American Express Business Gold Card, you gain access to a range of benefits and rewards. For example, Business Gold cardmembers gain access to over £500 in discounts per year, including with Airbnb, Deliveroo and Amazon.
Telegraphic transfers vs. direct debits
The key difference between a direct debit and a TT payment is who initiates the transfer of funds. With a direct debit, you are providing another company with advance permission to pull funds from your bank account. With a telegraphic transfer, you are the one sending the money to the recipient.
Direct debits are most suited to regular, ongoing payments for a predictable amount, whilst a telegraphic transfer is ideal for unpredictable or irregular payments that you want to control. However, as mentioned, it's important to consider that each bank involved in wire transfers must check and process the TT payment securely. The more banks that are involved, the longer payment processing will take.
Are telegraphic transfers right for my business?
Telegraphic transfers can be a useful way to send funds, but they can be costly, regardless of how much you plan to send. Moreover, they can take longer to process, particularly where international currencies and foreign exchange are involved. Lastly, whilst used broadly, not all banks or financial institutions offer telegraphic transfer services.
1. Membership Rewards points are earned on every full eligible £1 spent and charged, per transaction. Terms and conditions apply.
2. The maximum payment period on purchases is 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date. If you'd prefer a Card with no annual fee, rewards or other features, an alternative option is available – the Business Basic Card.
3. The information provided in this article is for informational purposes only and does not constitute financial advice. Always consult a qualified professional before making financial decisions. We are not liable for any actions taken based on this information.
