What Is an External Transfer? How It Works, Basics, and Types

External transfers allow you to transfer money between your accounts at different banks, send money to a friend or family member's bank account, or pay bills or services. External transfers are a no- or low-cost way to move money between accounts.

How an External Transfer Works

When you log into your online banking portal, use your bank app, or call your bank’s telephone banking number, you generally have the option to complete an external electronic transfer. External transfers send money from your account to a different institution's account.

Using an external transfer, you can send money to either an account you hold or one held by someone else. The process is usually the same, regardless of where you send funds. External transfers can be used to send money to a friend or family member—for example, to settle a shared expense or to send money for a birthday or a holiday. 

Sometimes, a company might ask you to pay for goods or services via an external transfer. You should be cautious, as it could be a scam. Because there are fewer protections for your money with an external transfer, you should only use it to pay for goods or services if you know and trust the seller. It could be a scam if you're asked to make an external transfer to pay for goods or services, so proceed cautiously.

Limits and Fees

Financial institutions may impose amount limits or other limits on the number of external transactions you're allowed to perform. This limit is often tied to the day and/or month. For example, no more than three external transactions in a single day and no more than 10 in a single month.

Some banks offer the external transfer service for free, while others may charge a few dollars per transaction. Money can often be transferred between accounts within the same institution for free.

Types of External Transfers

There are two primary types of external transfers—EFT and ACH transfers. You may prefer one or the other depending on whether you're sending money domestically or internationally and how soon you need funds to arrive.

EFT Transfers

External transfers are just one type of a broader set of money transfers known as electronic funds transfers (EFTs). Given that there are many types of EFTs, you probably use quite a few of them without realizing it. When you use your debit or credit card, you set up an EFT happening in real-time, and many checks are processed as EFTs.

Sending money internationally must be done via a wire transfer, another type of EFT payment moving money quickly between financial institutions around the globe. Wire transfers are typically conducted via specific bank-to-bank networks like the Society for Worldwide Interbank Financial Telecommunication (SWIFT) or Fedwire systems.

ACH Transfers

One of the most common sources of confusion regarding external transfers is the difference between EFT and ACH. ACH stands for automated clearing house, which is becoming a popular way to make external transfers.

ACH transfers are processed in batches each day. Funds sent via ACH can take 1-4 days to move from one account to another, depending on the two financial institutions involved in the transaction. Larger banks can often process ACH payments faster than smaller banks.

Example of an External Transfer

You can use your online banking platform or your bank app, call your bank’s telephone banking number, or visit a branch to make an external transfer. You will need:

• The account number of the account you're sending funds from.
• The bank routing number of the account you want to send money to.
• The account number of the account you are sending money to.

Sometimes, the person or organization you are sending money to can help you set up a transfer by providing these details or even by guiding you through setting up a transfer.

Banks usually make it simple to set up the same transfer again. Most banking apps will automatically add your recipient to a list of people to whom you can send money, and online banking systems will also remember that certain recipients have already been verified. 

You can also set up automatic external transfers from an account. Most banks will allow you to set up a “standing order” to transfer a specified amount of money regularly to an external account.

The Bottom Line

External transfers are a fundamental part of the modern banking system, and allow individuals and corporations to move money easily between accounts. They are typically simple to set up, but use caution if you are asked to make an external transfer to a company or individual you don’t know personally.