The best ways to transfer money internationally
Assessing the pros, cons and costs of different transfer options is important to get the cheapest and best deal on your international money transfers.
Today sending money abroad can be done in a matter of minutes no matter where you are located. Plus with the development of online money transfers and digital banking you can send money internationally and exchange multiple currencies without leaving your couch.
But you often pay for the convenience and speed that comes with fast money transfers, which is not always necessary nor the best option for large or regular money transfers. Fees charged for international transactions can be costly, which is why it is worth investigating the various money transfer options to ensure you get the best deal when sending money abroad.
Here foreign exchange provider TorFX explains the pros and cons of different ways to transfer money abroad. Use this guide to choose whether to send money online or via a wire transfer and how to find the best exchange rate and fee for your type of international money transfer.
What is the best way to transfer money abroad?
The traditional ways to send money abroad, such as via banks and wire transfers, are increasingly being challenged by specialised foreign exchange companies that offer online money transfers. Increasingly foreign exchange providers offer free online money transfers, competitive exchange rates plus online tools to monitor your international money transfer and get the best exchange rate.
It can be difficult to calculate the best way to transfer your money internationally through the minefield of varying exchange rates and money transfer costs of each broker. You also need to consider what is the most secure way to transfer your money abroad depending on your destination. Read on to determine the best way to transfer your money abroad internationally.
Bank money transfers
Most people first think of their bank when sending money abroad. Bank transfers are an easy option for many people but not always the most cost-effective or convenient method. Bank to bank transfers are known for being highly secure, but banks also offer a full range of financial services so they can't always allocate the same amount of exchange support or online tools as companies dedicated to just money transfers.
This can also mean that banks have less competitive exchange rates or higher transfer fees than dedicated foreign exchange brokers, as the latter can offer better deals due to a high volume of transfers. Although, this varies greatly so it's best to confirm rates with your bank. Some retail banks are known to charge more than EUR 30 in fees and exchange rates are not always transparent, incorporating a 5–7 percent margin on top.
You may find some advantages to bank money transfers, however, if your bank has international branches. If you and your recipient have accounts in the US and Germany with the same bank, for example, you may be able to transfer money for a low charge or for free. However, you would have to compare exchange rates to see if you are getting the best deal on foreign currencies.
Another benefit is that euro bank transfers within Europe can qualify for the SEPA (Single Euro Payments Area) agreement, which aims to facilitate banking across European borders by making international transfers the same cost as a local transfer, although check your bank for their specific details.
International bank transfers can usually be done easily online, in a branch or via phone banking and completed in a few days.
Send money via a wire transfer or transfer operator service
Many people are familiar with money transfer operators such as MoneyGram or Western Union, which are renowned for sending money quickly to almost anywhere in the world. These international wire transfers are particularly useful when a recipient doesn’t have access to a bank account, is in a remote area or needs cash fast. One useful example is in the case of a stolen wallet, where the recipient needs immediate funds.
Money operators can be convenient because you can typically transfer money online, via the phone or in-store in a matter of minutes or hours, not days as seen in other transfer option. However, fees for fast, worldwide delivery can be higher than other options and may increase with the more money you send. Money transfers can cost up to 5 percent or more of the transfer amount. Some wire transfer services offer deals and calculators to show estimated costs, although not necessarily the exchange rate.
Send money online using online transfer services
Transferring money via online money transfer services, such as PayPal, can provide some advantages when sending money abroad. If both you and your recipient both have an account you can often transfer money online instantly, even taking funds directly from your bank account so you don't have to arrange anything else.
Fees vary between providers; as an example, PayPal sets a flat rate of 4 percent on transfers, which might not work out the cheapest for larger transactions but can offer a fast and easy online transfer solution.
Sending money using a foreign exchange broker
Dedicated Foreign Exchange (FX or forex) companies are increasingly offering an advanced range of transfer and exchange services to compete with traditional methods of sending money abroad. Some benefits offered by FX brokers include free transfers, online money transfers, better exchange rates, 24-hour support and access to online tools such as foreign exchange alerts and setting your desired exchange rate. If you’re planning to send large sums of money abroad (more than EUR 1,000–5,000 for example), using a forex broker can be a convenient option.
You first need to deposit the funds you want transferred into the FX broker’s account (usually via online although other options exist, such as direct payment from your bank), after which they exchange your money and send it abroad. Although your FX broker might offer a free transfer, your own bank may charge a fee to transfer the money into the FX’s account. This, however, will typically be the cost of a local bank transfer (or free) if you use a broker who has a bank account in the same country or if it is a euro transfer within the EU and qualifies for the SEPA agreement.
Foreign exchange providers typically can provide better exchange rates and lower – or zero – fees than banks because of the high volume of transactions they conduct. Most online FX brokers have calculators on their websites that show you the total estimated costs, exchange rate and exact amount you will receive after the transfer, typically offering more transparency than other transfer options.
Another benefit is that you can often find better support services because FX brokers are specialist firms focused on foreign exchange, such as currency advice and real time exchange rates. The benefits of using a foreign currency broker typically include:
- some offer free transfer fees and competitive exchange rates
- you can lock in exchange rates prior to a fund transfer
- you can get personal advice or daily market information sent to your email
- they can help you plan and time your trade to get the most from your funds.
For regular payments – for example if you pay a mortgage abroad, transfer a salary or pay international school fees – foreign brokers may offer benefits on transfer fees or let you lock in an exchange rate to regulate the amount you pay in a foreign currency (see below). For one-time payments, locking in exchange rates can also be useful if you need to make a large transfer at an upcoming given date (for example, making a down payment on a house) and the market is unstable.
If your money transfer doesn’t need to be rushed, you can also create a 'limit order' or set a desired exchange rate to target. This essentially lets you nominate your ideal exchange rate, and you will be contacted when the currency hits that rate.
Foreign currency tools to help conduct your money transfers
Currency brokers typically offer additional exchange tools and services that most banks don’t offer, which can help you get a better deal when transferring and trading money. Using such services also allows you to protect your transfers from currency risk and stabilise your regular payments.
Setting a long-term exchange rate
In most cases, when you transfer money abroad you are undertaking a ‘spot trade’, where your funds are transferred at the current market rate. However, if you are transferring large or regular sums, for example buying a property or paying a foreign mortgage a property, a ‘forward contract’ can create payment stability. This involves locking in the current market rate for up to two years, meaning you know exactly how much money you need to cover the required amount of foreign currency, regardless of the market situation.
Setting minimum and maximum exchange rates
Other useful tools include ‘stop loss orders’ and ‘limit orders’. These set minimum and maximum rates at which you are willing to trade or send your money, respectively. This means you can wait for better exchange rates while at the same time know your funds will be transferred at the rate set by your ‘stop loss order’ should the market unexpectedly fall, protecting you from further losses.
Why do companies offer such different exchange rates?
All foreign exchange – or ‘forex’ – providers buy their currency from the private interbank market. They then add a margin on top of this when they sell it on, in exactly the same way retailers do with physical products. Companies offer different exchange rates because they use different profit margins.
How do exchange rates affect your international money transfer?
Exchange rates can greatly affect how much money you receive at the other end, and can have a particularly notable impact on larger transfers. The foreign exchange market is incredibly volatile, so knowing how to protect yourself from risk is key.
Exchange rates can fluctuate on a second-by-second basis. Political, economic, social and environmental developments can all affect the value of a currency. A sudden rise or fall in an exchange rate from, for example an election outcome, could make a significant difference to the total funds you receive from one day to another.
For this reason, timing does make a difference to your transfer and there are many online tools and alerts to help you get the best exchange rate, or you can lock in an exchange rate to take control of your transfers as explained above.
Exchange rates, however, aren’t the only fact to consider. The fees to transfer your money vary greatly between providers – whether free, a set fee or a percentage of your transfer – so an attractive exchange rate does not necessarily mean you will get more money. For example, a forex provider might charge a zero transfer fee but the exchange rate might be lower, while others might promote highly favourable exchange rates but charge higher transfer fees on top.
Tips to consider before you transfer money abroad
There’s a lot to think about when transferring funds abroad, although these concerns can be broken down into the following key points:
- Know what factors will affect your money transfers so you can better protect yourself from risk and keep up-to-date with the latest currency news.
- Choose your provider carefully – don’t just look at their rate but also at their levels of service and support in case something goes wrong.
- Decide on the best time for your transfer – do you have time to wait for a better exchange rate, or do you need to exchange your funds immediately?
When deciding the best way to transfer money abroad, a little research and planning can go a long way. Each money transfer option has benefits and downsides so you need to weigh them according to what you need, whether it’s speed or a low fee, based on how much money you have to transfer and how quickly it needs to be sent. Pick the right provider for your needs and you can enjoy simple, fast and cost-effective international money transfers.
TorFX / Expatica
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