Many people search for the cheapest way to send money overseas, but there is no single money-transfer method that is simpler or cheaper than another.
Whether you are traveling overseas or sending money back home, it is important to weigh all your options before sending and receiving money abroad.
Here is a checklist for the five main factors to consider when choosing a wire transfer method that will minimize the cost and maximize the total currency delivered to the recipient.
1. Bank account
The first thing you should think about is if you have access to any bank or financial accounts that may provide lower-priced or free foreign wire transfers. For example, some banks will let you transfer money abroad free of charge if the transaction takes place between accounts within the same bank. Citibank is one U.S. bank that has branches around the world, and wire transfers between U.S. and non-U.S. accounts are free.
If you need to transfer funds regularly with people in other countries, it may be worthwhile to open an account under the same bank as the sender or the recipient. Online payment methods, like PayPal, can also be an inexpensive way to send money internationally if this is an option for you and the recipient.
2. Wire transfer fees
Wire transfer fees are one of the two major factors that contribute to the total cost of the transfer transaction, which varies greatly among money-transfer service providers.
At the 10 largest U.S. banks, the average fee for outgoing foreign wire transfers was $47.50 – ranging from the lowest of $40 at TD Bank and Citibank, up to $65 per transaction at BB&T, according to an April analysis by MyBankTracker.com.
You may be inclined to go with the lowest transfer fee – and that is in fact what many people base their decision on – but the fee should not be the only factor you take into consideration when deciding the cheapest method to wire money.
3. Exchange rate
The second component to consider is the exchange rate. But determining the most appealing rate can be difficult, as it fluctuates constantly. There is a misconception that the exchange rate offered must be constant at all financial institutions – this is not the case.
As a result, many financial institutions made a bulk of their money from unassuming customers in the past. To prevent this unfair practice and to make the process more transparent, federal consumer protection regulations took effect in February 2013 to ensure more clarity in how the exchange rate is handled and presented to customers in the U.S. Although the exact rate applied in the transaction will be unknown until you have to perform a wire transfer, all the information will be presented to you before you complete the transaction.
To determine the best value, you should consider both the wire transfer fee and the exchange rate – as the hidden charges of the exchange rates can drastically impact the total currency delivered at the end of the transaction – especially with larger transactions.
[Read: How You Can Avoid Rising ATM Fees.]
4. Transfer amount
The amount you wish to wire is another factor that determines how much you will pay for the service. Each provider has its own rules regarding transferring different amounts.
For example, bank wire transfers can be advantageous for the transfer of larger sums of money, usually between $1,000 to $5,000, because banks charge a flat fee.
On the other hand, certain money transmitters, like Western Union and MoneyGram, charge based on how much you send – the more you want to wire, the more you’ll have to pay. Therefore, smaller transfers, like those below $1,000, will usually be the cheaper option.
You should be wary of money transfer service providers that lure customers with extremely low transfer fees on large amounts. Although the transaction fee may be cheaper, it will not be enough to offset the extra amount you will pay in terms of high exchange rates when you're transferring thousands of dollars overseas.
[See: 10 Dangers of Mobile Banking.]
5. Method of payment and delivery time
Delivery time is another determinant in how much you will pay for the wire transfer. Similar to overnight shipping, immediate transfers and delivery are more costly than regular ones.
How you choose to pay
for the transfer will also directly affect the delivery time. For example, paying
with a debit or credit card to send money will wire the funds almost
immediately, but it will also cost the most, relative to other forms of