Whether you are sending or receiving funds, you may be losing hundreds of dollars in fees and poor exchange rates. With a little planning, you can determine the best service for your business and start saving money today.
- Start with your bank.
Your bank is the first place to start in determining where to get the best deal. Some banks offer free incoming and outgoing international transfers, especially if you have a preferred account. If that is the case and your receiver is not affected, then your work is done.
If you do not have free wire services, it could be due to your account type or the destination currency. Some banks have free services only to certain countries. If your wire includes a correspondent bank or a non-affiliated foreign bank, then your bank does not have a foreign trading desk in that country. If so, you are a good candidate for looking into other options.
- Learn about online foreign exchange services.
There are many online foreign exchange options. They all claim to be quick and easy to use. However, they do require you to do your research. www.xe.com is a good place to start if you need more information. This site has a number of free online currency tools as well as competitive exchange rates. However, you cannot see the actual transfer rate until you sign up.
OFX does let you see the rate before you sign up and they have some free tools. If you are planning on sending $5,000 USD or more, there is no fee for the transfer. Cost savings on the more you send per transaction is the benefit of using an online wire transfer company.
- Consider peer-to-peer foreign currency exchanges.
Peer-to-peer (P2P) foreign currency exchanges are a newer option, proving to be a disruptive technology for transferring money. They work differently to reduce costs by taking out the middleman. With P2P transfers, the money never leaves the country, instead it goes to another account. Then the foreign currency is transferred from one of the provider’s affiliated accounts to your receiver’s specified overseas bank account.
Comparison shopping on the front end will ensure that your future trades are the most competitive. Every site claims to be the best. www.currencyfair.com lists and compares a number of their competitors. When this article was written, some had sign up special offers such as www.transferwise.com .
Once you know which type of provider suits your business, consider these factors to get the best deal.
- Know all the fees.
There are both sender and receiver fees to think about. If it is free for you to send the wire through your bank, but your supplier is charged by their bank a hefty fee. The amount will be reflected in their invoice. To reduce your costs, discuss with your foreign suppliers the best online options for their country.
Look for diminishing fee tiers. Fees can vary depending on how much you send. www.xoom.com is another site that waives fees for sending higher amounts to certain markets. Also, check that if you send higher amounts you are not charged more. By adjusting the amount according to the tier, you get lower to no fees.
- Exchange rates vary.
The amount of the foreign currency you can buy or send varies by company. This rate will fluctuate constantly according to the currency market. The bid-ask spread is how the provider makes money on the transfer. Money transfer websites are required by law to give you the actual rate before the transaction goes through.
- Delivery time affects your options.
Timing is everything in pricing out wire transfers. It can be the trade-off for the best rates on your international wire transfers. If you do not need to get the money there quickly, then you will have a lot more options for savings. Plan ahead for this option, as it may take a few days.
- The currency matters.
The country you wire money to plays an important role in determining which service to use. Some services are only available is certain markets. A provider must have a high volume in your currency to provide a competitive rate. The U.S. dollar, the euro, the Japanese yen, and the British pound are readily available. However, less traded currencies are not available on all sites.
- Read the fine print.
If you decide to go with a new option, read the terms carefully. Make sure they align with their advertised claims. I advise caution on Paypal when sending money abroad. It is not free as they have claimed on their site. In fact, it can be very expensive, depending on the country. Paypal, through its Venmo service, is now under investigation by the Federal Trade Commission for engaging in deceptive practices.
- Confirm that security measures are in place.
Honest and secure transfer practices should be well laid out on the company website. The registration process will require you to submit personal information such as your social security number and photo ID. Then your new account will be confirmed via a phone call. Your identity will be validated prior to funds being deducted from your account.
In the United States, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) oversees the financial system. Firms are licensed as money transmitters by their respective state banking departments and must adhere to anti-money laundering (AML) policies. Look for this license on their website. Then call the company with any additional questions before initiating your first transfer.