Did you know American banks take a healthy cut when you make an international money transfer?
To the dismay of many folks living in the USA, we have recently discovered that banks are only too eager to relieve you of as much as they can in fees – hidden or otherwise.
Unfortunately, money transfers to overseas destinations or back into the US are no different. For years the banks and remittance services have been the only choices for those who needed to transfer money internationally, but in recent years much better options are helping more and more people every day.
Now fortunately there are some much better ways to send your funds – money transfer companies!
Between transfer fees, varying exchange rates and processing time, using the right service for your specific transfer needs could save you hundreds or even thousands of dollars. Here is a comparison of the different ways to make international money transfers to help you make an informed decision.
|Service Name||Minimum Amount ($USD)||Phone/ Online Service||Locations||Fees + Conditions||Special Offers||Transferring $5000 to Canada (see *Note)||Transferring $50,000 to Canada (see *Note)|
|My Bank In USA||None||Online/ Phone/ Branch||Canada, US||$40||None||5,239.56*||52,395.60*|
|OFX||$250||Online/ Phone||Canada, UK, Australia, US, NZ, Hong Kong ,||Under $10,000 it is $15. See Offers >>||No Fees when you Register here||5,424.75*||54,247.55*|
OFX Full Review
|WorldRemit (A leader in the USA for smaller transfers back home. Allow cash pickup and many ways to fund the transfer)||None||Online||UK, US, Australia||First 3 transfers can be fee fee. See Offers >>||Click to Get first 3 Transfers Fee Free (use the code 3FREE until 31st May 2020)||Excellent for smaller amounts.||WorldRemit - Full Review|
|TransferWise||None||Online/ Phone||Based online. 50+ Supported Countries Including AUS, CAN, UK and US||Price depends on route (eg. AUD>USD is 0.7%)||Click for very competitive rates||5,451.87*||54,518.74*|
TransferWise Full Review
|XE - Full Review||0||Online||US, UK, CAN||No Fees||Fee free transactions||TBA||TBA|
See our full review of OFX here
As you can see the difference between a bank and companies like OFX and WorldFirst and banks vary significantly. In general, a money transfer company will almost always be the best option. In terms of the rates offered and fees charged, the difference between OFX V WorldFirst is minimal. However there are differences in the minimum allowable amounts, countries where they operate and their services.
A leading financial news outlet Quartz details how American banks are increasingly withdrawing from the money transfer business entirely in the face of quicker, more cost-effective money transfer methods that dealt a crippling blow to their near-monopoly.
Interestingly, remittance companies still have their place and so to do solutions like PayPal especially if you are transferring less then a few hundred dollars the recipient does not have a bank account. If you would like to learn more on how you can use PayPal or Remittance companies we have step-by-step info-graphics and explanations.
In general banks not only charge exorbitant fees but they also offer subpar exchange rates. If that is not enough, they are also one of the slowest ways to move money – often taking up to a week to actually arrive in the destination account.
If there is one point in favor of using a bank – it is that you do not have to use a third party company but for the minimal time it takes to actually set up an account in our experience the benefits far out the small commitment to signing up. In addition to Costs and Speed there are other important points that for many Americans are top of mind and these are Security, Service and the Countries Served. After considering what is important to you, you will be in a great place to make an informed decision.
Points to consider:
- Countries Served
Typically remittance companies are often the fastest, but this does come a cost of up to 9% or your money. For amounts less then a few hundred dollars, if both parties have a PayPal account we found that PayPal (and similar services) can be an excellent option. Remittance companies on the other hand may be your only option if you need to deal with cash. For amounts above $300, banks and money transfer companies do sometimes offer expedited services usually for an extra fee, but the most common choices take anywhere between 3 to 7 working days, with a dedicated money transfer company usually a couple days quicker than banks because they usually have the distinct advantage of having bank accounts in both countries.
When it comes to regulation in the US, in February 2014 new rules were introduced by the federal government as part for the Frank-Dodd financial regulation law. In addition to this, each state also also regulates money transfer companies.
If that weren’t enough, companies who operate overseas need to also meet the needs of anti-money laundering laws and other regulations of those countries. The idea behind some of this regulation is that companies have a duty to protect consumers. In reality, it’s in the best interest of any service to safeguard your money and the risk of losing your money during a transaction is extremely low. A far great risk exists in sending money to a fraudster, especially in the case of cash transactions.
The main theme of international money transfers is that one service does not fit all, so it is important to seek out a service tailored to your needs. Some companies handle the majority of their business by phone through a 24-hour hotline, and for those making large or complex transactions internationally, the live service and guidance these systems are set up to provide often prove indispensable. Others offer a more automated service over the Internet. Always choose an international money transfer service that is set up to provide you the services you need at the moment you need them, and this description fits very few banks.
The entire point of an international money transfer service is to be able to move your funds to a destination country as quickly and easily as possible, so the first thing to check is that your destination country is served. Other than this, just a handful of companies have domestic operations in the United States for sending money out of the country. Companies with operations in your home country are the best options because of service levels and rates they can offer are more likely to be more competitive.
Best Solutions We Can Find (So Far)
Money transfer services are rising in popularity. We have chosen just three because they actually have physical locations and/or are registered in the United States. They are companies that do one thing: transfer money between countries as smoothly and inexpensively as possible.
Many of these companies offer 24-hour service, favourable exchange rates compared to other transfer methods, and minimal transfer fees. OFX in particular charges just $5 for transfers up to $5000, and waives the fee entirely for larger transfers.
However for amounts less than $7000 USD, you will want to check out our TransferWise (review) because they are most likely your best bet in terms of fees and ease of sign-up.
The this growing market is extremely competitive, and so the providers will usually offer much better exchange rates than with other transfer types such as remittance companies, banks and other payment providers.
Due to strict regulations in these countries, transfer companies based in North America must be extensively evaluated on a regular basis to even operate, and they are governed by all the same regulations as a remittance service, so they also offer a high level of security.
In my experience, domestically based, international companies are the best options for transferring money because they are designed from the ground up to serve your needs.
Still Unsure? – Check for Yourself
It is easy to register with one of the companies I recommend and then to check against that bank or service you currently use. You will easily save a few percent on each transaction on average amounts to hundreds if not thousands of dollars saved.
If you would like to save even more money, I wrote a short PDF about some of the secrets about transferring money and I provide three ways to help save you more.