Making an International Money Transfer – Costs, Rates and Risks

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Transferring money domestically is pretty straightforward and you can normally work with one bank or financial institution to take care of the entire process. However as I and other friends who have moved overseas have found, transferring money across countries is not as straightforward. Further, the process, terminology and requirements tend to vary across countries. Moving money between America and England, Mainland Europe and Australia is relatively easy because these “developed” countries have established and regulated foreign exchange transfer systems. Whilst, moving money between African (e.g Nigeria) or Asian (e.g. India or China) countries is more complicated and generally more expensive due to less open financial systems.

However the good news is that there are various options for transferring money overseas between countries, and the best option will vary with where you live and where you are transferring the money to. I will discuss options that I and friends have used, along with the benefits, risks and potential costs, but with the caveat that every country has slightly different rules and terminology so check out your options beforehand. Also one thing I learned the hard way is, it is worth paying a little extra for added security.

Overseas Wire Transfers : Generally these are money transfers between banks or similar financial institutions like a credit union. You need to go to a bank branch to effect the transfer and provide details of where and to whom you are sending the money. Each bank requires varying levels of information, but generally they need the recipient details and name/address of the receiving bank (using  SWIFT codes). If you are not a customer of the sending bank, you will need to provide ID in addition to the funds (including fees) you want transferred. This method of money transfer is generally the safest and most reliable for medium to large transfer amounts, but not available in every country due to banking regulations and need for reciprocal account requirements.  Fees are collected from the sender as well as from the recipient, and sometimes clearing fees are charged if a third party clearance house is used. You should ask for a breakdown of the fees before initiating the transfer. Also, get confirmation (in writing) for the transaction via a transfer receipt number.

Online Bank to Bank Transfers.If you are transferring money between two of your self-named accounts (eg your bank accounts in England and USA), then a direct bank to bank wire transfer method is probably the easiest option. Particularly if the banks you are transferring between have global branches (eg HSBC). The money is wired in the same manner as above, but is generally cheaper and requires less identification.  You can also do this transfer online as I found out when moving money from Australia to US. I was able to transfer sums of less than $10,000 online for a relatively low fee and got amongst the best exchange rates (since no agent in between)

Agent Enabled Cash Transfers: Money transfer companies. like Western Union, MoneyGram and Xoom allow you to transfer relatively small sums of cash at various walk-in offices, via the Internet or by phone using a local debit card or credit card. You let recipients know that you’ve sent the money and they can pick it up from the transfer company’s local agent in their country. The benefit of this approach is that the money is transferred fast (within 24hrs) and pretty much to any country in which the agents operate (they claim about 95% global coverage) but you pay higher fees and get relatively poor exchange rates which reduces the value of the money you are transferring. This money transfer method is especially good for those who want to transfer small amounts of cash (less than $500) quickly to a less developed country. I know the Western Union money transfer option is very popular amongst immigrants sending money to India, Africa and China. They even have kiosks in a number of convenience stores and gas stations.

Paypal (an ebay company),  This is now a well established money transfer system that allows money transfer overseas to any person having a valid email address and payal account. To send money via paypal both you and the receiver have to have a registered paypal account. Fees are based on your account type and are generally between 3% to 4% of the transaction. The actual cash is taken out by the recipient via moving money from their paypal account to their linked/verified bank account. This form of money transfer is good for amounts less than $5,000, otherwise the fees eat up too much of the money. Also, while it is quite secure you should only send money to people you know or trusted merchants, since a valid email is the primary verification for the transfer.

Write a check : If you want to send someone money overseas you can write them a check drawn against your local bank (i.e. just like you would normally write a check to someone domestically).The process also works in reverse in that they can write you a check if you want to receive money. The check can then be mailed to that person who can deposit it in their local bank account. It will take 2 to 6 weeks for the check to clear and the recipient, or person cashing the check, will pay a pretty hefty processing fee ($25 to $100). Also this generally only works with banks in developed countries, or where foreign bank checks are accepted. This is a very safe way to transfer money, but takes a long time and is relatively expensive.

Postal Services Money Orders - Surprisingly various postal offices, like the US postal service, offer international money transfer services at post offices. The United States Postal Service for example issues international money orders, with the maximum daily limit of $10,000 (cost is approx $50 to $60).The money orders can then be cashed in banks or post offices in most countries around the world. You need to complete a money order form which will request various details of the sender and recipient, but the transfer is easy to track on-line via unique transaction numbers.

Key Factors to Consider when sending Money internationally

- Government Tracking and Regulations. Since the terrorist attacks of Sept. 11, 2001, governments around the world track money that might be used to fund terrorism. All companies that transfer money overseas must comply with laws to monitor financial transactions, including check ID’s of the sender and recipient. Banks and other financial services companies are required to also report large transactions (greater $10,000 generally) to official authorities. Thus for larger money transfers, expect delays in the transfers.

- Fraud. Don’t use money transfer companies to send money to strangers for any reason. Many scam artists ask victims to send them money this way. If you just sent a money transfer and suspect you might be a victim of fraud, ask the salesperson to stop your transaction immediately. If the transfer has not been completed, you may be able to get a refund.

- Excessive Fees. While there are many options to transfer money, don’t forget foreign exchange and money transfers are big money generators for financial companies. So shop around to see where you can get the lowest fees and best exchange rates. The fees will vary for the amount of money you are sending, the location of where the money is being sent and the urgency of the money transfer (eg. overnight transfers can cost more).

- Providing the right information. The number one reason people encounter issues with money transfers is because missing or incorrect information was provided to the bank, agent or intermediary processing the transfer. So triple check the information you give the bank to make sure it is all there. Otherwise you could spend weeks trying to track and get your money to the right place.

So if you are transferring small or large sums of money make sure you take extra precautions, even if it costs you a little bit extra. If you have any more methods to transfer money or comments on the above process (based on your experience) please leave a comment as I am sure it will help others.

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{ 1 comment… read it below or add one }

Linda November 19, 2010 at 7:54 am

Sir,
recently I am transfering fund online from UK to Asian country. I was requested to pay in order to obtain the TOC code from the bank. After obtained this toC code, again I was asked to enter the authentication code and I have to pay for it too. I was wondering how many code I have to obtain again so the bank can release the fund and how is the authentication code cost to be calculate ?
Kindly advise.
Thanks

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