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I believe the initialing bank will still hit the account holder with a fee to wire transfer to Dwolla.

I can transfer money from my bank account to my paypal account with no fee.

Why is there a fee to transfer money to Dwolla then?

It's free via ACH which Dwolla offers, however if you choose to use a wire transfer, then you have to pay whatever rate your bank charges.

That is considered an ACH transfer, which is the same way that you normally fund your Dwolla account. A wire transfer allows larger amounts and is much quicker but usually has significant fees attached to it. ( As well as some other differences)

http://en.wikipedia.org/wiki/Automated_Clearing_House http://en.wikipedia.org/wiki/Wire_transfer

So can I transfer money into my Dwolla account with ACH, and then wire transfer that money to someone's bank account (possibly oversea)? That way the whole process would be free.

"Dwolla now supports wire transfers for deposits."

It looks like wire transfer is only supported for depositing money into Dwolla.

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