What is the best way to transfer money between countries?

If you have to send money to an account overseas you’ll want the process to be fairly priced, simple and safe. Maybe you have to pay for an international purchase, to remit cash home to your loved ones, or to fund your day to day expenses while you work, study or retire abroad. You certainly don’t want to pay any more than you have to for your international money transfer.

Whatever your situation, we’ve got you covered. Here’s all you need to know about transferring money between countries.

Why do people send money abroad?

There are lots of reasons why you might need to send money abroad - maybe you’re an expat living overseas for a short while, or an entrepreneur dealing with international staff or supplier payments. Here are some of the more common reasons for transferring money between countries:

• Buying or selling a property - or other expensive items - overseas
• Renting out your place in your home country and sending the income to your new country
• Paying bills overseas - for rent, tuition fees, medical costs and so on
• Managing your international business, paying staff and suppliers based abroad
• Helping family or friends who are living or studying abroad - or remitting cash home if you’re currently working overseas
• Paying for a wedding abroad
• Retiring overseas, and paying for daily life from a retirement account based in Australia

What are the different ways to send money overseas?

If you need to send money to an account based in another country, you have a number of options. It’s well worth doing a bit of research in advance to check which route suits your needs best. Here are some common payment processes to consider:

Use your regular bank

Using your normal high street bank might seem like the obvious choice when it comes to making an overseas transfer. It’s a safe and familiar route, and you might be able to place your transfer online or on the phone, for convenience. However, the costs of international payments through a traditional bank can be fairly high.

There are likely to be several different fees to consider. You might find an upfront administration charge, and if your payment is processed via the SWIFT network, there could be further costs applied by intermediary banks. We’ll talk a bit more about these costs, and how to avoid them, later.

You’ll also want to check if the exchange rate used is fair. Banks often don’t offer customers the real exchange rate- instead they add a markup to the rate they offer, to protect their profit. You can check this easily by comparing the rate your bank gives you, to the real exchange rate available on Google, or anonline currency converter.

Try a payment provider like Western Union or PayPal

There are a wide range of payment providers which offer international payments, for a fee. You might choose Western Union or PayPal for example. With Western Union you can have the money delivered to a Western Union location local to your recipient, and they can then collect the cash in person. That means they don’t need a bank account, which can be handy. Some payments are also very quick, meaning you can have the cash in your recipient’s hands in minutes. However, Western Union fees are fairly high - especially if you pay for the transfer by using a credit card¹.

An alternative option is to make your international transfer online using PayPal. This is a quick and easy route - but check you’re happy with the fees before you confirm the payment. There’s a flat charge of $5.99 for any overseas transfer, plus an additional percentage fee if you use a credit or debit card to make the payment². There could also be currency conversion fees to consider, depending on where your money is headed, and the costs can quickly mount up.

Send cash or a cheque

It’s possible to send your recipient cash or a cheque in the mail - but there are a few good reasons to avoid this if you can. Firstly security is a huge issue, and sending cash in particular is a risky choice, in case your package is lost, damaged or stolen.

To avoid this you could consider sending a cheque - but these aren’t popular in all countries. They’re seldom used in Europe and much of Asia, although cheques remain a popular method of payment in the US. If you do decide to send a cheque don’t forget to take into account the time it’ll take to reach its destination - and also any delay incurred while it’s being cleared by the recipient’s bank.

Try Wise

Wise is a great alternative for many customers looking to send money overseas, and allows you to send money directly to your recipient’s bank account. Transfers can be made for both personal and business purposes, and are arranged entirely online, so they’re simple and convenient.

The fee structure is transparent, and you always see upfront how high the fee for your payment will be, so there are no hidden costs to worry about. You can also be confident that you’re getting the best exchange rate available, as all transfers are completed using the mid-market rate - the same rate you’ll find if you google it. More on that later.

How can I receive money from overseas?

You can receive money transferred from abroad, directly into your regular bank account. This could be helpful, for example, if you’re receiving rental payments from your property at home, while you live and work abroad. However, getting cash paid into your regular bank account can prove costly. There are often fees to pay, and the exchange rates used might not be the best out there.

If you’re receiving frequent payments from abroad, you might consider opening a foreign currency account - also called a multi currency account - with your bank, which allows you to hold cash in a different currency, alongside your dollars. Some multi currency accounts come with strict terms and conditions - such as a minimum required balance - or fairly steep fees, so do read the small print before you decide.

If you don’t like what your regular bank has to offer, you might consider a multi currency borderless account from Wise instead. This smart new feature lets you hold your money in more than 40 different currencies, and switch between them when you need to. There’s only ever a small, fair fee for converting currencies, and the exchange rates used are the best available.

When you need to be able to receive Australian or US dollars, or euros or British pounds, you can open your own virtual account in these currencies. After you’ve done this, you can receive these 4 currencies via local transfer methods. This means the sender won’t have to pay any hefty bank fees for sending these currencies to you, no intermediary bank fees will be taken of the amount that’s on its way to you, and you won’t have to pay any fees for receiving for receiving the money.

How can you save money when you make an international transfer?

Whichever route you choose to make your international payment, there are a few things you need to consider to check you’re getting a fair deal.

Check the fees

You’ll want to check the fees which will be levied on your transfer. Here you need to know the costs applied both by your bank, and any other, intermediate banks involved in the transaction. That’s because banks often send international transfers using the SWIFT network.

This is a network of banks working together all over the world to process international payments. It’s a safe and well established route - but it means that up to 3 intermediary banks can be involved in a single transfer, and each intermediary can add a fee to the transaction. If you’re unhappy with the costs of your transfer - or if your bank can’t guarantee what the intermediary charges might be - you might consider using an alternative route, such as Wise.

Understand the exchange rate

Aside from the fees and costs, you’ll need to check out the exchange rate used on your international transfer. Exchange rates typically change all the time in line with the market, which can make it tough to keep up. However, it’s worth checking out the current exchange rate for your currency pairing with Google or an online currency converter, to make sure the rate offered by your bank or payment provider is fair.

Google or an online currency converter will give you the mid-market rate for your currency pairing. That’s the only real exchange rate, and the one that banks use to trade among themselves on global financial markets. However, it’s common for banks and other money exchange services to add a markup to the exchange rate they use, which they can then keep as their profit. This isn’t transparent, and it isn’t usually a very good deal for the customer, either.

Transferring money internationally shouldn’t be too tricky - but there are a few things to watch out for to make sure you get a fair deal. Some payment providers will advertise low commission, or zero fee transfers - but if it sounds too good to be true, it probably is. Check out the exchange rate being used, as this could be where their profit is hidden. Usually you’ll get a better deal using a transfer service like Wise, which has a simple and transparent fee structure, so you don’t have to worry about sneaky hidden costs. See if you could save, today.

Sources:

¹https://www.westernunion.com/au/en/send-money/app/start (June 22, 2018)

²https://www.paypal.com/au/webapps/mpp/paypal-fees (June 22, 2018)