How to Save When Transferring Money to a Foreign Bank Account
When it comes to transferring money to an overseas bank account, the method and provider you used can make a substantial difference to what it ends up costing you.
For example, it could be easy to think you’re stuck with using one of the big banks at whatever exchange rate they offer. This isn’t the case though, as there are in fact many options for sending money overseas and they can differ markedly in what they provide and cost.
Let’s take a look at some of the factors and the main players involved.
Exchange rates when transferring money to an overseas bank
Believe it or not, not all exchange rates are created equal. For example, instead of using the mid-market rate (the mid-point between buy and sell rates) some organisations will add a mark-up fee to the rate to increase their profit. On top of that, this rate may not even be the same rate used at the receiving end. This means there’s no guarantee the receiver will get the full value of what you intended.
Transfer fees when transferring money to an overseas bank
If you’ve ever used a credit card to purchase goods from overseas, you’ve probably noticed an ‘international fee’ on your statement. These fees are usually calculated as a percentage of the transaction value, and there may be a fixed transaction fee on top of that.
So, let’s say a provider charges 2.9% in fees to transfer money to a foreign account. This means it would cost you $435 to transfer $15,000 – quite a substantial sum you could no doubt do without. If you regularly transfer money, the fees over time could be quite astronomical!
So, as for exchange rates, you should check out what the provider will charge you in fees for international money transfers (IMTs), because it could make a substantial difference to the cost.
What to look for in an IMT provider
ASIC’s Money Smart recommends comparing exchange rates, as well as how long rates are set for and whether the advertised rate is the one the provider will apply to your transaction. Other factors they recommend looking at include transfer fees, commissions, payment methods, and the time it takes to transfer funds.
Options for transferring money to foreign accounts
1. Bank transfers
Banks can offer security for IMTs, as well as convenience – such as the ability to transfer funds through online banking, or from a local branch.
The downside is that transactions can take several days to reach their destination, and the process is often more expensive for you.
In fact, an inquiry by the ACCC found that the Big Four banks are “consistently more expensive” than other IMT services. ACCC also found that the banks are not the only option that provide transactional security, and that their delivery is often slower.
2. Bank drafts
An international bank draft is like a guaranteed bank cheque that you can purchase from a branch, but in a foreign currency instead of AUD.
As you’d expect you would then have to send the cheque by snail mail to the receiver, who would then deposit in in their bank account – all a rather slow process! Bank drafts also have fees attached, and they can be problematic if they go missing.
Using PayPal can be a very convenient way to send money to someone overseas. However, while it’s free to send money locally, the fees to transfer money overseas are on the high side.
4. Foreign currency transfer provider
Using a high-quality specialist such as Currency Exchange (TorFX) to send money overseas can save you a lot of money, and you get to achieve more control over the process as well.
For example, here’s an overview of what Currency Exchange (TorFX) offers:
•Transfer online 24/7 or over the phone with your dedicated Account Manager. • Competitive exchange rates – through our Rate Improver Guarantee.
• Zero international transfer fees and no hidden charges.
• Forward contracts – allowing you to lock-in an exchange rate for up to two years ahead.
• Tools to allow you to set target rates and delay transfers that fail to meet your conditions.
•While there is no maximum transfer limit for transfers arranged over the phone there is a maximum online transfer limit of $50,000 for private customers and $200,000 for business customers.
Currency Exchange can be used for personal or commercial transfers of funds. You might for example want to send money on a regular basis to a relative overseas, to pay for goods that you import, or to send funds to pay for an overseas property.
The reason makes no difference however, as in any case we won’t charge you any fees and will ensure you get the best exchange rates possible. Click here to find out more.