5 Cheaper Ways to Transfer Money Overseas
Using a bank is one of the easiest ways of transferring money overseas, but can also be the most costly. While it is convenient to send money overseas this way, there are alternatives that can make the whole process cheaper.
Sending money to an overseas bank account is full of hidden fees which can be confusing and hard to spot. At the end of this article you'll find some practical steps on how to transfer money overseas without paying too much.
But first, let's look at 5 cheaper alternatives to using a bank to make an international money transfer.
1. A Bank Transfer Minus the Bank
A bank transfer allows you to send foreign currency to another bank account overseas. But like we said, doing this directly from your bank can be expensive. There are Kiwi and international companies that specialise in doing exactly the same thing, except they do it with much lower fees and better exchange rates.
Some fee free alternatives in New Zealand include OFX and XE Money Transfers.
When and why it’s cheaper:
If you are sending more than $1000, ‘non-bank’ money transfer companies are generally cheaper. This is because their fees are lower and their exchange rates are more competitive. Transfer fees vary between $0-$15 for small amounts but most companies offer fee free transfers for amounts over $10,000.
2. Peer to Peer Transfer (P2P)
P2P transfers work a little bit differently. Instead of wiring money overseas through a bank, companies that make these types of transfers match people buying currency in one country with people who are selling it in another. TransferWise and CurrencyFair are two of the biggest companies that offer P2P transfers and send your money this way.
Often a P2P transfer can be quicker because there are less banks involved. It can also reduce or eliminate a common hidden fee called a correspondent bank fee. Which again makes the transfer cheaper. Win-win!
When and why it’s cheaper:
P2P transfers are often a good option when you're transferring up to $10,000. They are usually very transparent which makes it easier to calculate the cost of your transfer. Sometimes, companies like this charge a percentage based fee. So you need to be careful of this if you're making large transfers because the cost can add up.
3. Money Remitters (for smaller amounts under $2000)
According to the World Bank, international remittances totalled 585 billion dollars in 2017. Now, thanks to increased competition from money remitters, the cost of these transfers is being brought down.
The more popular remitters include WorldRemit, Orbit Remit and InstaRem.
When and why it’s cheaper:
Money remitters specialise in smaller payments. They can be a much cheaper option for transfers under $2000, because their fee structure and exchange rates are usually much better. This is particularly true to less common destinations in Asia, Africa and South America. Unlike companies like TorFX or OFX, these companies rarely have a minimum transfer amount.
See: WorldRemit Review
4. Send Money Overseas Online
It doesn't matter which bank or company you use - it's almost always cheaper to send money overseas online when compared to doing it over the phone or in person.
Many companies like TransferWise only offer online ways to transfer your money overseas. It might seem inconvenient but it does mean that they can lower the overall cost of each transfer because they don't have to pay the costs of running a store.
When and why it’s cheaper:
In New Zealand, all major banks charge a lot less for using internet banking to transfer money overseas. This is compared to going into one of their branches. This is largely because it costs a lot less for the banks to transfer money online than in person. You should still compare your options for transferring money online, before deciding to use your bank.
5. Bitcoin
You can use Bitcoin to send money overseas, but be aware that it can be quite complicated. Especially if you are not familiar with using a digital currency. To do it, you’ll have to set up a wallet with a Bitcoin company, like Coinjar, then fund your online wallet with New Zealand dollars. This will then need to be converted to Bitcoin and sent to the person you are paying overseas. They also need to have a Bitcoin wallet and can then convert it to their local currency.
When and why it’s cheaper:
Bitcoin can be cheap and fast for most transfer sizes. You just need to make sure you and your recipient are comfortable using digital currency. Also remember, that there can be more risk using a cryptocurrency than the other options we have discussed.
How to transfer money overseas without paying too much
- Comparing your options - it's the first and most important thing to do if you want to avoid massive hidden fees. Make sure you know what exchange rate you'll get and what fees are involved.
- Next, make sure you have some ID and the bank account details of where you want the money to be transferred to.
- Depending on which bank or company you use, either call them or log in to their website to make the transfer. At this point, they will confirm the total cost of the transfer.
- If you aren't using your bank, you'll need to pay for your transfer by credit card or bank transfer.
- You might want to consider sending an email to the person you are paying to let them know the money is on the way. It should take 1-3 business days depending on how you've done it. But this can vary from company to company.
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