International Money Transfers (2)

Banks, Remittance Services and Forex Brokers

Continued from Part 1

Why would you want to send money overseas?
Perhaps you need to pay for the purchase of real estate or some other high-priced item by transferring funds from your US bank account to a person or a bank in Europe, or the other way around. You may want to pay a firm or individual in Germany for services provided (financial accounting, editing, writing, translating, etc.) or a private purchase. You may have a recurring payment that you want to automatically transfer overseas. You may be moving overseas and want to transfer some or all of your current account funds to a new location.

If you buy something from most businesses worldwide, you can use a credit card – except for some German companies! But if you need to pay an individual or transfer funds to a foreign bank, you’ll need to use other options.

World First

The best way to transfer funds either to or from Germany (or Europe) depends on several factors, only one of which is cost. The method you use will depend on the amount, type and timing of the transaction. Certain options are more suitable for certain kinds of transfers than others. There are three main providers of international currency transfers: (1) banks, (2) remittance companies, and (3) foreign exchange brokers (forex or FX for short). Each option has its advantages and disadvantages.

Euro coins

When it’s more than small change, check out all your money transfer options. PHOTO: Hyde Flippo

Although your first thought when considering an international money transfer might be your bank, a bank or credit union may not always be the best choice. However, certain banks (see below) do offer competitive rates and services for transferring funds from your bank account to a foreign bank account, especially for larger sums of money. This includes wire transfers and other electronic currency transfers.

Almost any US or Canadian bank offers wire transfer services, but for a price. The average cost at the top ten American banks for an outgoing international wire transfer is $45.50, while the average cost of an incoming foreign wire transfer is $17.50.(1) Citibank has one of the best rates (outgoing as low as $30 online), while several banks charge $50 for the same thing. Since a bank’s wire transfer fee is a flat rate, no matter how much you’re sending, this option can be the best deal for transferring larger amounts of money. But there is a hidden cost for international transfers that is sometimes difficult to determine: the bank’s exchange rate. Don’t forget to look at the total cost, which also includes the fee charged by the bank at the other end of the transaction.

Remittance Services
Examples of remittance services are Western Union (WU), MoneyGram and PayPal. Remittance companies are best for smaller amounts (up to $1,000) and when the recipient has no bank account. Western Union and others firms with physical branches offer international cash-to-cash (agent-to-agent) transfers. You give an agent cash and it gets transferred to another agent and converted to the local currency – dollars to euros, euros to pounds, dollars to pesos, etc. Some remittance services allow you to use a credit or debit card to make international money transfers, which usually reduces the transfer time but increases the cost. Some remittance services also offer an online option with cheaper rates. PayPal and Xoom are two well-known remittance services that are only online.

PayPal: What began as a way to pay for eBay auction purchases has grown into one of the largest international remittance services in the world. PayPal often offers the best option for amounts up to about $500. Both parties must be PayPal members and that requires a registered bank account. PayPal also offers the convenience of a mobile phone app that allows you to send money using your cell phone. PayPal operates in almost every part of the world (Africa being a rare exception). PayPal also makes it easy to see your fees and the total amount the recipient will receive. Many Germans and other Europeans have a PayPal account.

Xoom: Send up to $2,999 for only $4.99 from a US bank account. (The fee is $60.99 when using a credit/debit card. Most banks offer a better deal.) Deposit money to any German bank account including Deutsche Bank, Postbank, Commerzbank and Berliner Sparkasse. Most money transfers are deposited within two business days. A recent example, using Xoom’s online calculator: Transfer $1200 from a US bank to a German bank for a total cost of $1204.99. The recipient in Germany will receive €840.84 using the Xoom exchange rate of 1.00 USD = 0.7007 EUR. (Current rates will vary; the rate is fixed at the time of your transfer.) The Xoom website clearly states: “Xoom also makes money when it changes your US dollars into a different currency.” That is of course also true for any international currency exchange service.

In 2012 Consumer Reports ran a comparison of various international remittance services, but only using a scenario involving sending funds to Mexico from the United States. In that comparison, PayPal offered the best value for a $200 transfer, but not for $1,000. In both cases, Xoom placed in the top three. MoneyGram and Western Union both ranked low, costing more than most other services. The Consumer Reports comparison did not include any of the major forex firms.

Forex (FX) Companies
For larger international currency transfers or periodic transfers you should consider using one of the foreign exchange (forex, FX) companies, most of which are based in the UK but also have offices in North America and Asia. Forex brokers (not to be confused with forex traders) offer international currency transfers and payments to individuals and firms. They specialize in transferring funds from one country to another while converting one currency to another. An example would be the transfer of $75,000 from a US account to a German account and converting that amount into euros. The FX company makes money on the exchange rate, usually charging no other fees, or a low fee. A forex broker can also lock in a certain exchange rate for the transfer. To use a forex broker, you set up an account and arrange for a one-time transfer or periodic transfers.

Two of the largest foreign exchange brokers are HiFX and World First, both based in the UK. The following information about World First was provided by World First:

World First
World First is the UK’s leading currency exchange broker, offering private individuals and companies the ability to achieve significantly better foreign currency exchange rates and an exceptional service.

Set up in 2004 and headquartered in London, World First now also has offices in Australia, Singapore and the US. World First has transacted over £10billion, and helps tens of thousands of clients every year.

Whether you’re working abroad and sending money home, buying a property overseas, repatriating your pension payments or paying for your children to study abroad – or if you’re a business involved in making international payments – World First can make it easy, saving you time and money. Private clients will pay no fees on personal transfers, and companies are guaranteed a package of low payment fees and unbeatable exchange rates.

Each client is assigned their own personal consultant, who works with them to make sure they achieve the best exchange rates possible in the time frame they specify.

Why use World First?

  • A best exchange-rate guarantee
  • Compared with banks, World First’s rates can usually save you between 0.5% and 3% of the amount transacted – up to $6,000 on a $200,000 transfer.
  • Fastest available international payments – same-day for dollars, euros and pounds
  • Forward contracts and other hedging options to protect you from currency movements and to fix the exchange rate for a transaction up to three years in the future.
  • Best-in-class online platform – book a trade, add beneficiaries and check balances 24/7
  • Most currencies, transferred practically everywhere
  • FCA authorized, and a best possible 3A1 credit rating

For more information, please fill out the WF contact form. They will be delighted to talk through your requirements and discuss the various options available to you.

International Money Transfer Tips
Here are some ways to save money when transferring money internationally:

  1. Shop around and compare. Look for the option that best suits your needs.
  2. Transfer a large amount once, rather than smaller amounts often.
  3. Pay attention to tier limits. How much you pay usually depends on the amount of the transfer. Don’t transfer a large amount of money using a service geared more to smaller amounts, or vice versa.
  4. Pay attention to the total cost! The fees you pay may be low, but the exchange rate high. In order to make true comparisons, look at the total amount the recipient receives. Sometimes a higher fee is worth it if the exchange rate is better.
  5. Sometimes you and the recipient will get a better deal with remittance services if you send money in the local currency and let the recipient convert the amount into the local currency, getting a better exchange rate. Example: Send dollars to someone in Germany and let them convert the amount into euros. But for larger sums, a forex service will offer a better deal.
  6. Don’t pay for speed if you don’t need to. If the money doesn’t have to transferred within a few hours, you can save money by choosing a longer time period of time – a few days or even a week or more.

Total Cost
No matter which type of money transfer service you use, the total cost of any international currency transfer depends on four main factors:

  • The transfer fee charged by the bank or money transfer company
  • The amount of money you are transferring
  • The speed of the actual transfer (within minutes, hours, days, weeks, etc.)
  • The currencies involved and exchange rate at the time of the transfer

Also see Part 1 of this article.

1. Source: “Comparing Bank Wire Transfer Fees” (April 18, 2013),

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