Whether you are doing business with international clients, or wiring a one-off payment to a loved one in another country, sending money internationally can be daunting, especially if you have never done it before. Today, you can send money abroad in a few minutes, wherever you are. Digital banking and online money transfer apps enable international money transfers and currency exchanges to take place at the click of a button.
What Are International Transfers?
An international money transfer is a safe and secure way to send money internationally as a gift or to make a purchase, and it may be more cost-effective and faster than using your bank. If you are moving abroad, it can also be used to collect regular wage or pension payments.
Both one-time and ongoing foreign payments can be made through an international money transfer firm. You can also use them to transmit a greater amount, such as a deposit for an overseas property purchase.
How Does International Money Transfer Work?
Transferring money for international payments require three key players;
- The sender
- The receiver
- The money transfer service provider
The sender initiates a money transfer from the money transfer service. You can send money internationally in person or online, depending on who you select. You must include the recipient’s information as well as the amount you wish to send. When the money transfer service provider receives the payment, the funds are transferred to the recipient.
Here are some of the important aspects you need to know before getting into international transfers.
- Using your bank
Although you can make a transfer in person with your bank, it is usually easier and less costly to use its online banking option. This is because transferring money to one of your bank’s branches will cost you more. Due to a lack of price transparency from banks, it’s also impossible to tell how much the transfer will cost you ahead of time. Moreover, your recipient is unlikely to receive the exact amount you sent. You will have to pay extra merely to ensure that your recipient receives the specified amount.
- Using an online money transfer service
To combat banks’ excessive fees, online money transfer firms employ cutting-edge technology to reduce expenses and pass the savings on to their clients in the form of reduced rates. It is simple to make a transfer by simply creating an online account and getting it validated. Once it’s finished, you can make an online transfer whenever it’s convenient for you. Fees for online money transfer services are more open, so you can simply find out how much your transfer will cost you ahead of time.
- Using cash transfer service
You or your recipient do not need a bank account to send or receive money, unlike bank transfers. By filling out a money transfer form at one of their physical locations to make a cash transfer, your recipient will be able to pick up the cash in minutes after you’ve paid for the transfer. Cash transfers, on the other hand, are much more expensive than online transactions.
- Exchange rates
Banks and money transfer providers charge a markup or fee on the exchange rate they use to convert your money in addition to the transfer fee. As a result, knowing the rates before making a transfer is necessary. A bad exchange rate can cost you a lot of money, especially if you’re sending big international payments.
- Transfer in the local currency
To lock in the exchange rate and receive reduced transfer fees, send your payment in the recipient country’s local currency. Processing costs may be deducted from your transfer by other banks, resulting in the recipient receiving less money than you planned. You can pay an offshore bank fee upfront to cover these deductions in some countries and currencies, but this is in addition to the amount you wish to send in order to ensure that the receiver receives the precise amount you wish to send.
- Check transfer limit
Many banks and financial institutions set a limit to international money transfers so that they can monitor the money flowing in and out of the country.
It’s a good idea to get the opinion of an independent financial consultant when transferring money internationally for payments and paying taxes. Different nations have different regulations about how much tax you should pay on any money you receive, and it all depends on the type of the money – whether it’s a financial gift, a pension, or a regular wage