An international money transfer involves sending funds to an individual or company overseas.While banks have traditionally remained at the forefront in remitting money abroad for many years they are also more expensive.
In recent times, a number of private money transfer companies have sprung up, that are not only cost-effective but have simplified the process of movement of funds from one country to another. If you are new to international money transfers, this comprehensive guide will address the big question-which money transfer service to use?
Cost of an international money transfer
The answer to this question can depend on various factors. Cost can vary across different companies as well as the country you intend to send the money to. It also depends on the mode of payment like cash, card etc. The exchange rate between the two countries is also a major determining factor. Even though there are laws in place for charging inflated exchange rates, it is still necessary to cross-check to ensure that you are getting the best deal when sending money abroad.
Money transfer services, usually offer money transfers at a set market rate and add a transfer fee for their services. Other companies may not charge service fees, but may add a small percentage to the mid-market exchange rate.
As a rough estimate, banks charge between 4-5%, while other money transfer providers work on margins as low as 1%. One thing all providers will surely do is to charge a fee for their services, so you just need to make sure about their transparency before you sign on the dotted line.
Key features to include
In order to get a good understanding of the exchange rate, don’t hesitate to shop around a bit to locate which institution will give you the best international money transfer rates for the amount you want to remit. Ultimately, the final cost of your international money transfer will depend on the following:
- The amount of money you are transferring.
- The prevailing exchange rate
- Fees charged by the service provider.
In addition, check the credentials of the company you choose if it is registered with the right financial authorities and the encryption method they use to ensure your money is safe.
Importance of money transfer companies
All money transfer companies are not the same and nor is the service they provide. It all boils down to the requirements of the customer. While some companies are ideal for remitting small amounts, others only specialize in handling large sums. Depending on the destination country, currency you are sending, amount and mode of funds, here is a quick review of some prominent money transfer companies, to make sure you get the best possible deal.
- XE: offers services to over 170 countries in 60 currencies, but their most popular routes are New Zealand, Canada and the United States.
- Safe and reliable
- 24×7 account management.
- Speed:1-4 working days.
XE only supports payments through online transactions and phone. No card or cash pickup service.
- WISE: Their biggest selling point is they will confirm the exact amount which the recipient will get even before the transfer is effected.
- Transparency in fees
- Trusted and reliable
- Speed: charge extra depending on the time you want the transfer to go through. Otherwise 3-5 working days.
Does not support large transactions. No option for cash pickup
- OFX: the company has a wide distribution network with offices in major capitals and services to 155 countries in 55 currencies.
- Competitive exchange rates. The larger the amount, the better the rate.
- Wide banking network
- User friendly mobile app
- Excellent customer service.
- Speed:1-5 working days.
However they do not accept transfers below$1000, credit cards and are limited in same day transfers.
You can also check out this comparison between XE OFX and Wise for a detailed overview.
Different types of money transfer companies
A plethora of money transfer services are available to the customer nowadays that not only provide rates to beat the banks, but are secure, cheaper, faster and more convenient. These services which offer an alternative to using the bank, generally fall into three categories.
Remittance Companies: Their facilities are mostly used by immigrants who are earning a living in one country and wish to send money to their family members in their home country.This in turn acts as a huge source of income for the receiving country, where otherwise income opportunities are limited. Some reliable remittance providers around the world are XOOM, WESTERN UNION,REMIT GURU and RIA MONEY TRANSFER.
Peer to Peer(P2P):
These smaller money transfer companies enable remittance from one person to another directly. The transaction can be carried out through credit cards or online from one bank account to another through the cell phone itself. While PayPal is the undisputed leader in P2P services, more and more unique platforms like Zelle, Venmo, Google Pay and Social Media transfer apps like Facebook Messenger allow people to send and receive money through a linked bank account.
Non Peer to Peer (NP2P): Non P2P providers handle extremely large transfers between companies of two different countries or individuals. The best companies to use are OFX, World Remit, WISE or XE.
Banks: Using a bank to send money abroad is not a good idea. They attract a higher fee, in the range of $40 per transfer. Additionally the mid-market rate they give will be the worst than you can find anywhere else. In the end you will end up shelling out 5-7% more than by using a specialist service provider.