People send money overseas for many reasons. According to data from the World Bank, migrants living in the U.S. sent an estimated $625 billion to friends and family members in their home countries in 2017 alone. You may send money internationally to buy or rent property, pay tuition and school fees, gift money to friends, book a vacation abroad, or buy something from a foreign vendor or merchant.
If you need to send money to someone outside of the U.S., you might find yourself at a loss for where to start. Which is the best way to send the money quickly, and how can you avoid exorbitant transaction fees or a terrible interest rate? Here’s what you need to know.
Ways to Send Money Internationally
Just like there are many ways to spend and exchange money in the United States, there’s more than one way to send money outside of the country. While you can’t always pick how you send and receive money internationally, here are some methods to consider if you have a choice.
1. Cash-to-Cash Transfer
This method is just what it sounds like: converting cash in one country to cash in another. You take cash to a money transfer service location, such as a Western Union counter, and have that money sent to someone in another country, where they receive it in cash in their local currency.
Cash-to-cash transfers are popular in developing countries where many people are unbanked, meaning they don’t have a bank account. Cashing a check or finding a bank branch can be difficult in places without a lot of banking infrastructure, such as rural and low-income areas. A cash-to-cash transfer allows the recipient to access the funds in cash immediately.
With ease of access comes risk. If the money in a cash-to-cash transfer is lost or stolen, there’s no recourse for getting it back. For a stolen credit card, companies typically refund fraudulent purchases and issue a new card, but cash is only useful when it’s in your wallet.
2. Bank-to-Bank Transfer
If your bank has branches or partner institutions in other countries, you may be able to send money from your account to an international recipient’s account with the same institution. It usually requires providing the account and routing numbers for both parties, either online or over the phone.
One of the main benefits of a bank-to-bank transfer is that it can be very inexpensive or even free, depending on your bank’s rules and how quickly the recipient needs the money. Many banks don’t charge anything for three-day bank-to-bank transfers, and the fees for faster transfer times can be as low as a few dollars per transfer.
To do a bank-to-bank transfer, you’ll need a fair amount of information, such as the recipient’s bank account and routing numbers. If the person you’re sending money to is a stranger instead of a friend or family member, they might be reluctant to give you this information.
Also, the recipient must have the same financial institution as you. This method won’t work if either party has a smaller regional bank or credit union instead of a large multinational bank with many branches.
3. Account-to-Cash Transfer
Account-to-cash transfers can be used to send money from your bank account to someone overseas who doesn’t have a bank account. Your bank sends the money to the recipient, who can pick it up at a location such as a Western Union counter in their country. Not all banks are equipped to handle this kind of transaction, so check with your bank to see if it’s an option. You can also explore a standalone service, such as TransferWise.
One of the main benefits of account-to-cash transfers is that the recipient doesn’t need a bank account. In countries without much banking infrastructure, or in rural areas where the nearest bank branch may be prohibitively far away, many people turn to account-to-cash transfers.
Just as with a cash-to-cash transfer, one big drawback of an account-to-cash transfer is that the recipient picks up the money in cash. That means there are no protections against fraud or loss.
4. Credit-to-Credit or Debit-to-Debit Transfer
Another method that’s just what it sounds like, a credit-to-credit or debit-to-debit transfer is when you use your credit or debit card to send money to an international recipient’s credit or debit card. It’s not an option with every credit or debit card, and the card company usually views it as a cash advance, which can come with high fees.
This method is simple and straightforward. People usually use it when they don’t have access to other options for sending money internationally.
If you choose this method, make sure you understand all the fees associated with it. It may prove so costly that a different method would be a far less expensive choice. If both the sender and recipient will be hit with fees from their card companies, it’s probably more economical to wire money using a service such as MoneyGram or send a prepaid debit card.
5. Prepaid Debit Card
Prepaid debit cards are cards you can load with a specific amount of money. The recipient can then spend down that money until the balance is zero. Not all prepaid debit cards can be used internationally, though. Verify that the card you’re thinking of using will be accepted in the recipient’s country.
Prepaid debit cards are reloadable, so once the recipient spends the balance, the card can be reloaded with more funds. For people with bad or no credit, prepaid debit cards can be a good way to build credit.
Prepaid debit cards can come with many different kinds of fees, so be sure to read the fine print closely if you choose this option. Some prepaid cards have so many fees and costs associated with them that they can be borderline predatory. Do some research on a reputable website such as the Consumer Financial Protection Bureau’s and choose wisely.
6. Digital Wallet
Digital wallets are popular in countries where there isn’t much traditional banking infrastructure but many residents have a smartphone. Some of the most popular digital wallet brands are Samsung Pay, Venmo, and M-Pesa. A digital wallet securely stores your payment information, including passwords, allowing you to send money digitally to recipients using the same digital wallet.
Depending on which app or service your recipient uses, you may need to know only their email address or username to send them money. Digital wallets are becoming an increasingly popular way to send and receive money across the globe.
The recipient must have a smartphone or access to a Web-enabled computer. These are the only ways they can securely store payment and balance information and receive funds using a digital wallet.
Costs of Sending Money Internationally
Just as there’s no such thing as a free lunch, there’s also no such thing as a free international money transfer. No matter which method you use, how much you send, or to whom, you’ll lose a little money in the process, whether it’s from sneaky bank fees or a crummy exchange rate.
Here’s what to watch for and how to keep the most money in your – and your recipient’s – pocket.
When you send money across borders, the financial institution you use will most likely charge you a wire transfer fee. It may be a fixed amount or a percentage of the amount you’re sending, and it can be as little as a few dollars to as much as $50 for a single transfer.
Another thing to keep in mind is that some banks or wire transfer companies charge different fees depending on the currency you’re sending. If you’re sending dollars from the United States to another country that uses U.S. dollars, then you may not incur as much of a fee as you would if the bank had to change the currency format. Some banks, on the other hand, will charge you less in fees if there’s a currency conversion involved. If you have a choice over which currency to use, ask the bank if using one currency over the other will get you a better rate or cost less in fees.
Some banks charge you different fees based on how you initiate the transfer. For example, if you request and process the transfer over the phone, that may cost more than setting it up online.
Finally, if you need to expedite an international money transfer, that will likely also incur an extra fee.
Prepaid Debit Cards
If you’re using a prepaid debit card instead of a bank to send money, that comes with its own fees. Not all cards charge fees, and not all cards charge the same kinds of fees, but there are several common ones to watch for.
Does the card require a monthly fee, whether or not you or the recipient use it? Is there a withdrawal fee if the recipient uses the card to get cash from an ATM? Is there a reloading fee for adding more money to the card?
These types of prepaid cards charge so many different fees that the Consumer Financial Protection Bureau has a page explaining all the different kinds of fees to look out for. Check it out to educate yourself before choosing to send money internationally via prepaid debit card.
Another way that banks and money transfer companies make money is by giving customers a poor exchange rate. An exchange rate is how much one currency is worth compared to another. Set by the Foreign Exchange Market, or Forex, this continually changing rate tells you how expensive it is to buy, sell, and exchange currencies at any point in time.
Many banks profit from customers sending money abroad by giving them a worse exchange rate than they would get on the open market. The banks then keep the difference in amounts as a way to recoup their costs.
For example, let’s say you want to send $20 to someone in Mexico, where they will receive it in pesos. Let’s also say the current public exchange rate is 19.18 pesos for $1 U.S., so your recipient should receive 383.69 pesos.
However, instead of taking your $20 U.S. and giving the recipient 383.69 pesos, the bank rounds the exchange rate down to 18 pesos for $1 U.S., so the recipient only receives 360 pesos. The bank then keeps the 23.69-peso difference as a way to make money on the transaction. Many banks and money transfer services that advertise themselves as “no-fee” make their money in this way instead. Always read the fine print carefully and do some arithmetic before you choose a service just because they claim they don’t charge a fee.
Ways to Minimize Fees
While there’s no way to send money abroad without losing a little cash in the process, there are reputable companies and services that can make the transaction a bit less painful for both parties. From tried-and-trusted services to the newest smartphone apps, here are some options to consider.
Based in London, TransferWise is a service that’s been around since 2011. It was founded by Estonians frustrated with the fees and poor rates associated with living in one country and frequently needing to send money to another.
How It Works
TransferWise keeps its costs low by routing payments in a unique way isn’t as pricey as traditional currency conversions can be. Instead of simply routing the sender’s money directly to the recipient, TransferWise matches the money with other users who are sending currency in the other direction. That way, TransferWise doesn’t have to pay the currency conversion on every single transaction, only on those they can’t match with money traveling in the other direction. By matching exchanges in this way, the company can avoid incurring expensive currency conversions across countries in most cases.
How to Use It
In order to send money with TransferWise, you’ll need to register for an account. You can do so using an email address or with your Google or Facebook account. The individual you’re sending money to does not need to sign up for a TransferWise account, but they will need to have a bank account into which the money will be deposited. You, the sender, can send money with your credit card, debit card, or by transferring money from your bank account to TransferWise.
TransferWise’s low fees are a big draw for many users, as is the fact that there’s no minimum transfer limit. The maximum limit for an American’s first transfer abroad is $15,000 using an Automated Clearing House (ACH) transfer and $1 million using a bank wire transfer. ACH is the most commonly used way to transfer money between bank accounts.
Because TransferWise tries to match currency in a unique way, it can sometimes take up to a week for transfers to be completed. If you’re looking for a guaranteed quick turnaround, you might want to use a different service to send money abroad.
OFX, an Australian-based company previously called OzForex, has been headquartered in Sydney since 1998. In addition to its location down under, OFX has offices in several time zones, including in London, Toronto, San Francisco, and Hong Kong. It also operates the money transfer abilities of companies such as Travelex and MoneyGram.
How It Works
OFX makes money by keeping the difference between the market exchange rate and the rate it offers customers, otherwise known as a markup rate. One of the reasons OFX is popular is because its markup rate is often far less than the rate other money transfer companies and banks charge. OFX rates usually hover around 1%, while some banks charge as high as a 7% markup.
How to Use It
To send money with OFX, you’ll have to register online through their website. OFX is known for their stringent customer identification and verification, which means that setting up an account is not always speedy. Once you’re in, you can send money internationally via bank account transfer or BPay if you’re in Australia.
If you’re sending money from the United Kingdom, you can also use a debit card. If you’re in the U.S. or Canada, you can also send money via wire transfer.
OFX gets good ratings for their customer service, which is available 24/7 thanks to all those office locations. Because of the way it structures its markup, it doesn’t charge a transfer fee for sending money. It also offers users the chance to compare rates with other money transfer services, which is helpful if you’re still considering your options.
The recipient can only receive funds into their bank account. If your recipient doesn’t have a bank account, OFX isn’t an option for you. If you need to send smaller amounts of money abroad, keep in mind that OFX has a minimum amount of $1,000 per transfer.
Founded by Somali-born Ismail Ahmed in 2010, WorldRemit provides online money transfer services to migrant communities and other underbanked populations around the world. WorldRemit doesn’t have brick-and-mortar offices where users can convert cash to transfers. Because of this, the service is often cheaper than traditional money transfer companies such as Western Union.
How it Works
Ease of use is a big part of WorldRemit’s appeal. Customers can sign up on their phones and send money electronically to recipients’ bank accounts, in cash at pickup locations, via mobile wallet, and in the form of more airtime to recipients’ prepaid cell phones.
This feature is especially appealing in countries without a vast network of landlines where many residents rely on prepaid phones for communication. By the end of 2018, WorldRemit was enabling users in 50 countries to send money to family and friends in 150 countries around the world.
How to Use it
To send money with WorldRemit, you’ll need to download the mobile app and set up an account. You will then upload a picture of a valid photo ID when you send your first transaction with the app.
Once you input your bank account number, how much money you want to send, and to whom, the app shows you the exchange rate you’ll get and how much it will cost to complete the transfer. You can double-check this amount before hitting “submit.”
WorldRemit touts its commitment to security and fighting money laundering. Users can only send money in an electronic form through the website. They can’t go to a bank branch with a suspiciously large amount of cash and then send that money to an associate in a different country via electronic transfer.
Also, WorldRemit cuts down on their costs by not having physical locations and instead doing everything online. As a result, they can charge users lower fees.
For unbanked users, not being able to convert cash to an electronic transfer is a disadvantage rather than a benefit. As part of their basic security protocol, WorldRemit also requires that users have a government-issued ID to send money via the app. That can be a barrier to users from countries in which this is not an easy document to acquire.
4. Western Union
Originally used to send telegrams from one end of the U.S. to the other, Western Union is also the granddaddy of sending and receiving money abroad. It’s been helping people send money far and wide since the late 1800s.
How It Works
Western Union charges fees for their money transfer services, and these fees can vary widely depending on where you and the recipient are located, how quickly you need to send the money, and how you choose to send the money. Fees are the primary way that Western Union makes money for their services.
How to Use It
You don’t need to set up an account or input your bank routing number to send money to someone in another country using Western Union. You can simply visit a Western Union branch in person with cash or your credit or debit card. You can also send money from your bank account if you prefer. Once you fill out the necessary forms, the money is whisked off to its recipient, who only needs the tracking code and ID to pick it up.
One of the main benefits of Western Union is its ability to help you send money to so many different places – over 200 countries and counting. You can send money without having a bank account, which is helpful if you’re unbanked or want to send funds with cash or a credit or debit card. Recipients can collect money in cash, on a prepaid debit card, deposited into their bank account, or via mobile wallet.
Despite its many attempts to educate people on how to avoid fraud, Western Union is still often used in a variety of ways to scam people out of money. The problem is so prevalent that Western Union even has an entire page dedicated to common types of fraud and how to avoid them.
Western Union is also usually at the higher end of the spectrum in terms of fees, which vary depending on if you send money using their online form, in a store, through the mobile app, or via phone. You can play around with their price estimator to get a clear idea of how much it will cost you to send money internationally with them.
5. Xoom by PayPal
Xoom, which was launched in 2001 and acquired by online payment giant PayPal in 2015, is another popular option for sending money abroad because of the speed with which the company can handle these transactions. For some destinations, a transfer can be completed almost instantly, as opposed to the three-business-day ACH handling time – although it will cost you in fees.
How It Works
Xoom makes money through the transaction fees it charges users, which start at $4.99, and from foreign exchange fees. You can only send money with Xoom via checking account, debit card, or credit card; it does not accept cash as a way to send money. Recipients, on the other hand, can receive money via bank deposit or cash pickup.
How to Use It
To send money using Xoom, you’ll need to sign up for an account on their website or download the mobile app. From there, you’ll enter your payment information – either your checking account or your debit or credit card number – and fill out the recipient’s information.
One of the nice things about Xoom, compared with Western Union, is that it offers a money-back guarantee. If the recipient does not receive the money, Xoom will refund your transaction. Xoom also has a wide reach, allowing customers to send money to 131 countries around the world. Finally, Xoom has a robust verification system for ensuring the accuracy of users’ information and protecting financial data.
Xoom is often criticized for having higher fees than similar services. Be sure to check its fees and exchange rate calculator before you send money to someone in another country with this service. Another drawback is that while customers in 131 countries can receive money with Xoom, only customers in the U.S. and Canada can send money with it.
Gone are the days when you had only one company to choose from when sending money abroad. With the plethora of choices out there, you’re sure to find the right option for your situation.
Whichever option you choose, be sure that you’re sending money to the correct person; that you keep records of your transaction and any confirmation information; and that you’re informed about any possible fraud or scams.
Finally, pay attention to how long the transfer will take to ensure the money gets to the recipient on time, especially if they’re on a tight deadline or need it to pay an upcoming bill. In all cases, reading the fine print will make you a more informed, savvy consumer.
Have you ever sent or received money internationally? What company did you use? Were you surprised by the amount you had to pay in fees?