What’s the Best Way To Transfer Money?
In our increasingly globalized world, international barriers are disappearing when it comes to working and living. Increasingly, people work for companies based in other countries. This is especially true for those working in the online gig economy who need to send or receive money in different currencies. So, what’s the best way to transfer money in these situations?
There are four main options to consider: money transfer services, banks, currency exchange brokers, and online payment processing companies. Let’s take a look at what each option entails.
Option #1: Use a Specialized Money Transfer Service
Over the past few years, fintech innovators have moved into the money transfer space. So, you now have the option to easily arrange cross-denominational international money transfers on websites and apps. Money transfer companies are generally very straightforward to use: create an account, enter your payment details and your recipient’s details, then confirm the transaction.
In many cases, money transfer companies give you a rate quote before you formally authorize a transaction. To lock in your rate, simply authorize the transaction. The associated costs and fees vary: some providers maintain very slim mark-up margins on their conversions but add transaction fees. Others provide no-fee service with bigger exchange rate mark-ups. Many companies accept a variety of payment methods: credit cards, debit cards, bank transfers, and digital wallets.
There are several pros to using money transfer companies. For instance, they usually offer the best exchange rates, thus saving customers money. These services are also very convenient to use, as most are available 24/7 on both desktop and mobile systems. Plus, a few money transfer companies also offer rush transfers with very short completion times. When available, these transactions usually carry an extra charge.
However, there can be drawbacks. You should do a bit of research to ensure the service you’re considering is licensed, reputable, and beholden to the requirements of the relevant regulatory authorities.
Option #2: Use Your Financial Institution
For many years, retail banks were pretty much the only game in town when it came to sending money to international recipients. Banks continue to offer this service today, which is known as a wire transfer.
Banks offer both domestic and international wire transfers. Domestic transfers don’t cross international borders, and therefore don’t necessitate currency conversions. International transfers, on the other hand, usually do. These transfers are transacted across the common electronic banking networks used by financial institutions around the world.
Bank-based wire transfers are fairly straightforward. First, visit the bank and fill in a form that specifies both your and the recipient’s account details. Next, indicate the amount of money you wish to send, and the bank will then handle the currency conversion for you. Then, the financial institution deposits the funds into the recipient’s account.
Wire transfers are safe and reliable, and many people continue to use them because of the peace of mind and immediate customer service availability that traditional financial institutions provide. However, on the downside, banks maintain fairly bloated margins on their foreign currency mark-ups, to say nothing of the hefty wire fees many also impose.
Using your bank is a reliable option, but it’s often the most expensive way to send money across borders.
Option #3: Use a Specialized Currency Exchange Service
Many cities host specialized businesses that exclusively provide currency exchange and wire transfer services. These payments are transacted over the same banking networks as traditional wire transfers, with the only real difference being the nature of the sending institution. Specialized currency exchange services often provide better exchange rates, especially to customers transferring large sums of money.
The pros and cons here are similar to those for retail banks, but they are moderated somewhat by more advantageous conversion rates. In many cases, fees are also lower as most of these companies are looking to draw business away from banks. However, this option involves an extra step, since you’ll have to submit funds to the exchange service in your local currency before the transaction can be processed.
If you have the time to make the extra withdrawal or transfer from your bank account to the currency exchange service, then you can save a little money while enjoying similar levels of reliability as you would get from a bank.
Option #4: Use an Online Payment Processing Service
Online payment processing services like PayPal have built-in tools that allow users to convert currencies. You can use them to send money to recipients in other countries, with one key caveat: the currency you are looking to convert your money into must be supported by the payment processor.
Let’s look at PayPal as an example. PayPal supports many major global currencies but not all of them. For every supported currency, the company requires formal authorization by the country’s government. If it doesn’t have that authorization, the transaction can’t be completed or even initiated. Furthermore, these services usually offer slightly better exchange rates than retail banks, but not by much.
It’s also worth pointing out that in order for this approach to work, your intended recipient needs to have an active account with the payment processing service. Setting up an account can take some time and involves multiple verification steps. If you’re in a hurry and your recipient doesn’t already have an account, problems can result.
Assuming both the sender and recipient are already set up with compatible payment processing services, this approach can be convenient. Conversion costs are usually lower than you would pay at a regular retail bank, but they are still heavily marked up.
So, What’s the Best Way To Transfer Money?
While we can’t definitively answer this question, we think money transfer services often deliver more bang for your buck. Specialized money transfer companies offer a balance of affordability, convenience, safety, and reliability. They are often less expensive than banks, and many money transfer services have reliable reputations. Of course, you’ll want to do your due diligence by comparing top money transfer services to find the right one for your needs.