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Where'd my money go?
Many of us have found that funds can mysteriously shrink while en route to other countries through a combination of unanticipated fees and stinker exchange rates, especially the latter.
CHOICE member Trish R, for example, was stung with a $30 sending fee, wore a terrible exchange rate, and then got hit with a $50 receiving fee on the other end of her overseas funds transfer. The amount she sent overseas bore only a passing resemblance to the amount that came through on the other end.
That's because she sent her money through a bank rather than an online money transfer service – rarely a good idea. (Trish knows better now.)
Our tip: Look at alternatives to the big banks – namely online-based transfer services – when you need to send cash overseas.
Which are the best services?
There are lots of players out there at the moment who'll act as intermediaries when you want to sent Aussie dollars to an account overseas (or foreign currency to your local account for that matter).
We've narrowed it down to a handful that have consistently beaten the banks in our testing – and then some.
- OFX (formerly known as OzForex) – minimum transfer $250; $15 fee for transfers under $10,000, no fee for over $10,000.
- World First – minimum transfer $2000; no fees.
- CurrencyFair – minimum transfer 8 Euros or equivalent; 3 Euros or equivalent transfer fee.
- TransferWise – no minimum transfer; fees depend on currencies exchanged and are made up of a percentage of the transfer amount plus a small fee.
- XE – no minimum transfer; $500,000 USD or equivalent maximum transfer; no fees.
These non-bank services, among others, are better than banks by a long shot when it comes to sending money overseas, but:
- you'll need to open an account and verify your identity (as per financial industry regulations)
- some charge a modest fee (compared to banks) for transfers under a certain amount
- some services have a minimum send amount.
Is one transfer service better than the other?
We checked out the players above using the same money transfer scenario in the same timeframe (since exchange rates are in constant flux).
All offered a comparable exchange rate saving compared with the banks, with no real standout over the testing period.
One reason no service stood above the rest in consistently offering the best deal is that there are a number of variables at play.
How long it will take for the money to arrive in the receiving bank, for instance, will depend on how quickly the sending and receiving bank process the transaction.
This is out of the non-bank money transfer service's hands.
The point is that they're all better than the banks by a wide margin and can be used safely and securely if you follow directions, which are not difficult.
Among other things, the deal you get will depend on:
- the size of the transaction
- the currency involved
- the exchange rate offered on the day
- whether you're a regular customer, since some services offer loyalty discounts.
Taking a dry run
One way to choose among these services is to use their online tools to execute a hypothetical transfer without actually committing to the deal.
If the service doesn't allow you to do this (they all did when we tested), consider another service.
Go with the service that gives you the best deal, but don't forget to factor in fees if they apply.
Again, the service that may offer a slightly better deal can change from day to day, and you probably wouldn't want to set up an account with every transfer business listed above and check each one for the best deal every time you make a transfer – though you could.
When we tested, the deals were all in the same ballpark.
Banks still take a cut
Even if you're using a non-bank money transfer service, the sending and receiving banks (the banks that send money to and receive money from the money transfer service) will still charge a fee, which will vary depending on the bank and transfer scenario. The non-bank services admit that they can't control these fees.
Use the right calculator
Money transfer services (as well as banks) provide conversion rate calculators on their websites, but it's not always clear if you're seeing the inter-bank (or mid-market) rate that applies to the banking industry or the customer exchange rate that applies to your transfer.
The inter-bank rate shows a better deal on the exchange rate, but you won't be getting this rate on a personal transfer. Then again, you'll be getting a much better rate than you would with the banks.
Some money transfer services have a calculator on the home page that uses the inter-bank rate but show 'customer rates' on another page. Other services have a customer rate calculator on the home page.
The point is to make sure you're looking at customer rates, but in any case you'll be able to see the exchange rate that will be applied before finalising the deal.
Seeing what you get
Non-bank transfer services offer a level of transparency that's lacking in the banking world. You'll always know the exchange rate and any fees before finalising, which means no nasty surprises at the either end of the deal – at least not from the money transfer service.