If you have ever tried sending money abroad then you probably know too well the pain of making international bank transfers. Indeed paying a bank account abroad seems to cost more than it should. In this post we are going to take a look at the best way to transfer money abroad to help you save money.
Once upon a time, it was commonplace for most people living to never stray more than 20 or 30 miles from where they were born – yep, for centuries, humans lived, loved and lost all within a very small geographic vicinity. But flash forward to 2022 and we now find ourselves in an increasingly interconnected world where 5 decades of globalisation have thrown us all together whether we like it or not. More and more of us than ever are travelling further than before, ordering exotic goods by the boatload, and doing business across international borders.
For the most part, this is all very exciting and the relentless march of globalisation has created untold opportunities. But there are also some challenges to transacting internationally too, not least of which is the cost of sending money abroad.
The Costs of Sending Money Abroad via Paypal or Banks From USA
If, like 5.9 million households annually, you have ever sent money abroad then it’s likely that your primary instinct was to make the transfer either by using your bank or maybe your Paypal account. And this is understandable. These days pretty much everybody has both a bank and a Paypal account and both do offer relentlessly easy foreigne transfer services.
However, in reality using either your bank account or Paypal to send money abroad is the most expensive and needlessly costly way to do it. Let us tell you exactly why.
Whenever an account holder instructs their bank to send money to a foreign bank account (even a foreign USD bank account) then they charge the account folder a transaction fee. In the US, these fees typically range from $2 up to $15 depending on the individual bank and depending on the finer details of the specific transaction.
It doesn’t end there either. In addition to collecting transaction fees, banks also get to set the exchange rates when the account holder is sending money to a foreign, non USD account (which is the vast majority of cases!). Rather than making the exchange at the prevailing forex market rate, banks usually apply a slight mark-up on the rate which allows them to make a profit (typically around 2-3%).
The Costs of Overseas Bank Transfers
Therefore using the banks to handle a transfer can mean being charged a fee of anywhere between $2 – $15 and then being charged an extra 2-3% on the exchange rate.
As for Paypal, despite presenting themselves as a cutting edge fin-tech challenger, the reality is that they operate a very similar business model to the banks and their fees and forex rates are akin to those offered by American banks.
Considering that an estimated $148 billion US dollars is remitted from the US annually, you can see that a lot of money is being lost to fees and extra costs. Fortunately though, there are plenty of alternative ways to send money overseas.
The Popular Bank-Alternatives For Paying a Bank Account Abroad
Market forces like nature, abhor a vacuum. As such there are many different companies specialising in low cost international money transfers. We shall now take a quick look at some of them and examine why they are the best way to send money abroad.
Founded as an formerly known as Transferwise, Wise was established in London as an international money transfer specialist and soon rose to popularity amongst freelancers and travellers.
Whilst originally set up as a money transfer service, Wise’s mission has now grown considerably and they even offer a current bank account. As well as low cost, fast money transfers Wise can also offer zero-fee overseas card payments and zero-fee overseas ATM withdrawals of up to $300 per month.
For many householders with relatively simple needs, Wise can be best for transferring funds abroad.
Unlike Wise, OFX is a money transfer and currency specialist who caters primarily for business customers. Their low fee transfers options and bank beating forex rates make them a good option for any business that needs to send large amounts of money abroad – such as for running an overseas payroll or paying large foreign supplier invoices and forex.
OFX operates a global network of offices in Europe, North America and Australasia/Pacific region. They can offer clients competitive exchange rates and account management services.
However, operating primarily as a B2B specialist, OFX are not really the most logical or cost effective for regular American households.
A subsidiary of the financial services giant that is the Bridgepoint group, the multinational Moneycorp offers foreign exchange, global payment and currency services to both business and private customers.
Moneycorp customers have access to low fee foregn exchanges in 33 currencies and competitively priced fopreign payments to recipient accounts in over 190 countries.
However, we have found that Moneycorp does apply a bit of mark-up on forex rates.
Why Are They The Best Way to Transfer Money Abroad
The 3 money transfer specialists who we mentioned here all have slightly different business models and all have their pro’s and con’s. However, all 3 make much better options for sending money abroad than using either the banks or Paypal. This is because they all offer lower transaction fees (or zero transaction fees in some cases) as well as more favourable forex rates. In addition to being more cost effective than the banks, these companies are also able to offer faster international payments – indeed, transactions that can take the banks days to process can sometimes be completed within minutes.
Final Thoughts On The Best Way To Send Money Abroad
In conclusion, whilst more of us than ever before are sending money abroad, international bank transfers need not be so expensive. Paying a bank account abroad can now be done cost effectively by taking the time to find the best way to transfer money abroad.