September 15, 2017
By Gabrielle Olya
Transferring funds to a friend or family member abroad doesn’t have to be a stressful or expensive process if you know the best way to do it. Usually, the most cost effective way is not through a bank or broker.
To save money on your international transfer, look for a service that’s upfront about the fees it will charge you so you don’t end up paying more than you anticipated. Also, look for a service that offers you the mid-market exchange rate which is the "real" rate currencies traded on the open market.
Find out how to send money overseas without paying hefty bank fees.
When it comes to sending money internationally you have a few options, including:
Wire transfer services
Online money exchange tools
Peer to peer currency exchanges
When you use a bank to send funds, you’re rarely offered the mid-market exchange rate also called the spot rate or interbank rate. It is the mid-point between the buy and sell rates on the global currency markets. Google, Reuters and many online currency conversion calculators use this conversion rate.
When you transfer funds abroad through a bank, you’ll notice that the conversion rate you receive is much lower because the bank is taking the difference as its commission. This can cost you up to eight times more than other options. By offering a lower exchange rate than the mid-market exchange rate they can pocket the difference.
Western Union also makes a profit from currency exchange, even though the company technically doesn’t charge a transfer fee. PayPal charges a percentage of the transaction amount ranging from 0.50 to 2 percent plus an additional fixed fee, depending on the destination country. It also makes about 3 to 4 percent on the currency exchange rate. TransferWise, an international money transfer alternative to traditional banks, exchanges currency at the mid-market exchange rate.
To avoid paying bank fees, consider a peer-to-peer currency exchange service which typically charges a percentage of the amount sent, and includes its fees upfront in the conversion amount.
You should also factor in convenience. If going to your local bank is easier than sending money online, contact your bank to find out how much you might pay in fees to compare your options. Also, make sure the exchange rate service providers give you matches what you see when doing a Google search. If it doesn’t, the provider is probably making a profit off the rate.
It takes extra time, but it pays to explore the various methods to decide which money transfer method is right for you.
Peer to peer services like TransferWise can give you the mid-market exchange because your money doesn’t ever cross borders. Each customer’s money is put into a pool in their origin country, and transfers are taken from the respective community pools. Because the money doesn’t actually cross international borders, bank markups are avoided.
When sending money to loved ones overseas, you likely want it to get there sooner than later. How quickly your money will arrive depends on a few factors, including:
What time you initiate the transfer
Before you send money internationally, you can use a transfer calculator to get an estimated time of arrival. Once you initiate the transfer, you’ll get a more accurate time estimate based on the information you provide. The short answer is: It varies.
Depending on the country you need to send money to, you might pick one service over another. International money transfer services might not be available in every country so do your research, especially if you have family or friends in remote parts of the world.
If you use Transferwise, for example, you can send U.S. money to 58 countries and 40 currencies, including India, Morocco, New Zealand, Singapore and Vietnam, on every continent except Antartica.
To understand the fees associated with sending money abroad via all the different ways to send money, compare how much it costs to send $1,000 from the U.S. to Mexico. The mid-market exchange rate is 17.90 Mexican pesos for $1, as of Sept. 5, 2017.
|Service Provider||Transfer fee||Exchange Rate for $1 U.S.||Delivery Amount|
|$4.99 for bank transfer; $24.99 for credit or debit card||17.3480 MXN||17,348 MXN (when using bank account)|
|$9.90||17.8865 MXN||17,709 MXN|
|$5||17.4561 MXN||17,456.10 MXN|
|$5-$15 online; $6.99-$8 in person||17.3736 MXN||17,374 MXN (when charged $5 fee)|
When choosing how to send money internationally, it’s important to look not just at the fees, but the exchange rate and overall transaction. For example, TransferWise has the highest transfer fee, but it also offers the best exchange rate so your recipient ends up receiving the most money through their services. More of your money goes towards friends or family than to a corporation.
If you want to get the most bang for your buck, the best way to send money overseas might be through a peer-to-peer service rather than your bank."I have used it for a number of transfers from small to big," a recent customer wrote in a Trustpilot review. "Not a single issue. Easy to use and great rate. I highly recommend it."
When deciding how to transfer your money internationally, make sure if you send money online that your provider is registered and regulated by the financial regulatory bodies in both the country of origin and the destination country. Double checking that your provider is regulated will ensure your money can be recovered if it’s lost.
In the U.S. for example, TransferWise is registered with the Financial Crimes Enforcement Network, and it’s licensed as a money transmitter in 42 U.S. states. Midpoint, a U.K. based peer to peer international money transfer service, keeps its accounts in line with FCA regulations, according to its website.
When choosing an alternative to banks when sending money abroad, it’s important to verify the company is supervised by regulatory authorities in your state of residence. If you choose to transfer money through an online service, look for a website with HTTPS encryption. You can find this by looking at the website’s URL. If it starts with "http" instead of "https," it’s not secure.
To use a peer to peer service like TransferWise, follow these steps:
Gather your recipient’s banking information or their email address. If they are already registered with the service, you can select which of the bank accounts associated with their account you want to send money to.
Decide how you’ll send the money. You can transfer funds using a debit card or credit card with certain currencies including the U.S. dollar, or through online banking.
Choose the device you’re sending the money from. Funds can be transferred through the TransferWise website, or through the mobile app. If you’re using EUR, GBP or AUD to make the transfer, you have the additional option to pay by Apple Pay.
Customers also have the option to send money to businesses rather than individuals. This feature is helpful for freelancers or independent contractors to receive payments from clients overseas.