TRANSFER MONEY ABROAD
The process of transferring money abroad is commonly referred to as an international money transfer. Of course, your priority is to get the best deal. You want to make sure that as much money as possible is received on the other end of the transfer. A lot of factors impact the amount of money you can successfully transfer between different currencies. This article will give you 6 tips about what to look for when transferring money abroad.
Table of Contents:
- Know the mid-market rate
- Be cautious of services that claim to have ‘0% fees’
- Methods to transfer money abroad
- BEST way to transfer money abroad
- Compare how much money will be transferred
- Currencies supported
1. Know the mid-market rate
The mid-market rate is the most important piece of information you should understand before you transfer any money abroad. You’ll also see it called the interbank rate. It is the base exchange rate between currencies. In other words, the mid-market rate is the mid-point between the price sellers are willing to sell the currency and buyers are willing buy the currency. It’s the perfect example of supply and demand. As a result, the mid-market rate is constantly fluctuating.
You should know the mid-market rate because it is the rate all transfer services use to determine their fees and, as a result, how much of your money will be transferred into the other currency.
Anyone can find the mid-market rate. It’s not a hidden secret. Google will give you that day’s true mid-market rate between any two currencies. All you need to do is type the two currencies you want the mid-market rate for into the Google search bar. For example, you can type, “Current exchange rate euro to pounds.” Google search results will show you how many pounds you can get for 1 euro as of that time.
2. Be cautious of services that claim to have ‘0% fees’
Some services will market themselves to you by saying they have ‘0% fees’ or ‘zero commissions’ for international money transfers. That’s not true.
It’s almost never free to do an international money transfer!*
If a service tells you they will transfer your money with ‘0% fees’ then they are charging you a higher exchange rate than the true mid-market rate (the rate explained in tip #1).
For example, let’s say you just arrived to Germany and you need to exchange some of your pounds for euros. It’s a Monday and today 1.00 pound equals 1.08 euros. You find a service that says it will transfer your money between the two currencies for no extra fees. Well, unbeknownst to you, the service is actually just charging you a higher exchange rate. Services such as this will do it without telling you. In this example, the service might charge you an exchange rate of 1.05 pounds for 1.08 euros. You think you’re getting a free transfer, but the service is secretly pocketing the extra money for themselves.
Oftentimes, banks do this. They will charge you an exchange rate higher than the mid-market rate, and falsely tell you the transfer comes with no extra fees.
Therefore, you should always look for transfer services that use the mid-market rate and tell you how much their fees are upfront.
* TransferWise offers a fee-free transfer of up to 500 GBP for your first time using TransferWise.
3. Methods to transfer money abroad
- Remittance Services
- Foreign Exchange (forex) Transfer Services
- Bank Wire Transfer
There are 3 types of services you can choose from to transfer money abroad. They each function differently.
Bank wire transfers are almost always the most expensive method of transferring money abroad. On the other hand, forex transfer services are almost always the least expensive (and fastest) method of transferring money abroad.
The only time you’d use a remittance service is if the either the sender or the receiver does not have a bank account. However, TransferWise (a forex service) has something called a borderless account. Anyone can open this bank account to make international money transfers through TransferWise. If you have access to a computer and internet connection, this is a great alternative that will save you money.
You can read more about the differences between the 3 ways to transfer money abroad here. This article includes a table comparing remittance services, forex transfer services and bank wire transfers.
4. BEST way to transfer money abroad
A forex transfer service is the best option for transferring money abroad. Most forex transfer services use the mid-market rate (see tip #1) to transfer your money. TransferWise, for example, uses the mid-market rate. The way TransferWise makes money is by charging a very low, flat fee. It is composed of two things: the amount of money you transfer and which currencies the money is being transferred between.
All international money transfer services need to make money from providing you their services. I like TransferWise the most because they’re upfront about how much money they’re charging you. From my experience, TransferWise has always been the most honest, fast and fairest service for transferring my money abroad.
You can read more about TransferWise in our article, “TransferWise Explained: 6 Things You Should Know.”
5. Compare how much money will be transferred
In the end, the best way to see what service is giving you the best rate is to compare how much money will successfully be transferred. In other words, look at how much money will be received on the other end of the transfer.
Using this link, you can transfer up to 500 GBP for free through TransferWise. If you’re transferring money with a different currency, such as dollars or euros, you can still get the discount. The amount discounted will just be the equivalent of what 500 GBP is in the currency you’re using.
Many banks require you have an account with them to see how much it will cost to transfer your money. With TransferWise, however, you can see how much money would be received on the other side of the transfer without having an account. Go to their homepage to use their transfer calculator. It will show you how much your transfer will cost.
6. Currencies Supported
Lastly, you need to make sure the transfer service you choose to use supports the currencies you need to transfer money between. With TransferWise, you are able to transfer money between all major currencies. More specifically, Transferwise supports transfers sent in 22 different currencies and received in 50 currencies.
Here you can see a list of the currencies supported by TransferWise.
Something else to note: If you’re an expat living in Germany, you should get a German bank account. Our article, “Best German Bank Account For Expats,” explains the top 6 things you should consider in order to choose a bank account in Germany.
*Full Disclosure: Some of the links we use on this website are affiliate links. By using those links, you help keep our website free. There is no additional cost for you. We also want to note that we only recommend services we trust and that we would use ourselves.