This guide will highlight everything you need to know about money transfers as an expat.
Nowadays, international money transfers is a common practice thanks to the globalisation of economies. You can work in the United States and buy a property in Mallorca, invest in a business in Macau or pay for a holiday in Sao Paolo. However, for all this to happen there needs to be free movement of people, goods and capital.
Until the turn of the 20th century, most expats turned to mainstream banks to help them send money to their families and friends overseas. Even those paying for mortgages and other bills, banks were convenient to them at the time. However, this also means that the expats had to contend with steep fees and unfavourable exchange rates.
Bank turnaround times also meant that transfers took anywhere from 5-7 working days to be delivered. Expats transferring money for emergency reasons were the most inconvenienced. Even today, sending large amounts of money across borders has its fair share of cost, time, and currency risk implications.
Thanks to the rise of global fintech companies, you can now make digital transfers and payments worldwide. The variety of payment solutions these companies offer make it easier for you to transfer funds to bank accounts, using credit cards and debit cards including Visa, Mastercard and UnionPay or even directly to your recipient’s mobile phone.
Whether you are looking for a more rewarding job, a new environment or a change of career, moving to another country can be one of the options open for your consideration. Often times conflicting factors are involved when deciding where to move. Some of them include the quality of life, childcare, salary consideration and job opportunities. Nevertheless, the following countries stand out as the top expat destinations.
Other destinations for expats include Taiwan, United Arab Emirates, France, India, and Indonesia.
Transferring funds across borders to your family, friends or to pay for that vacation, can be costly and cumbersome. The main cost drivers are exchange rates and transfer fees. Whether you are transferring money through the banking system or via online money transfers providers, understanding the transfer cost structure with help negotiate or choose a better deal. To help you find a better money transfer provider, we’ve put together a series of guides covering:
Take an example of a GBP/USD transfer. The rate as published by Google and Reuters could be about 1.30. If you use a bank such as Lloyds, you may get a GBP/USD rate of 1.23 This means that for every sterling pound you transfer, you are losing 0.07 GBP. For large transfers running into tens of thousands of pounds, the difference can be quite remarkable.
Most banks if not all, charge a fixed fee per transaction. For instance, Barclays UK charges a £25 fee for every international transfer. If you are sending to a bank account in the United States, your recipient or you, depending on the agreement, will have to incur an additional $15 to $16 as a receiving fee for the transfer. These charges are in addition to correspondent and intermediary fees that you may incur before the transfer gets to your beneficiary.
If you turn to online money transfer providers, you will also come across fees as well though their structure may be different. Some providers will charge you fees that are a percentage of the amount you are transferring, which means that the higher the transfer amount the higher the fees you’ll pay and vice versa.
Others such as Paysend will charge you a fixed fee irrespective of the amount you are sending. For instance, Paysend charges a flat fee of £1 for any amount you transfer to a European country from the United Kingdom. When making large transfers to the tune of £10,000+, such fixed fees come in handy to give your recipient more money.
Exchange rate margins refer to the difference between the mid-market rate and the rate your transfer provider charges you. It is normally expressed as a percentage. For instance, if your provider converts USD to AUD at a rate of 1.45 while the mid-market rate is at 1.48, the margin is calculated as (1.48-1.45)/1.48 giving you 2.03%. For every 100 USD transferred, you are charged a margin of 2.03 USD.
You need to watch out for these margins for they can grow pretty quickly as the transfer amount increases. Different providers charge different margins based on the currency pairs involved. The best way is to use a comparison tool that shows you exactly what the recipient will get after the fees and exchange rate margins are deducted.
Many online transfer providers such as Paysend, TransferWise, WorldRemit and InstaReM have transfer widgets on their websites that show you how much your recipient should expect.
Every expat has unique reasons why they send money to their families, friends, business associates and so forth. Some providers also demand that their customers provide a reason for their transfers. Especially in light anti-money laundering (AML) regulations, such disclosures are extremely important.
Thanks to our partnerships with currency specialists such as Paysend, we can provide our readers with the information they need including the common reasons for sending money overseas.
Your choice of a transfer provider not only saves you money but also time. However, the decision of who to choose may not be an obvious one, especially when looking at an entire pool of providers. From transaction fees to exchange rates and other costs in between, picking the best provider often requires detailed cross-comparisons.
Pick a scenario where you are transferring money from the UK to Australia to pay for a holiday costing A$ 5,500. You can decide to use high street banks such as Lloyds Bank, Barclays UK, HSBC, and NatWest or next-generation global fintech companies such as Paysend.
HSBC offers a secure way for you to make your transfer to Australia. You can use their Digital Secure Key mobile platform, money online platform, telephone banking or visit one of their branches.
Since Australia is not within the EEA, HSBC will charge you £4 if you are transferring online and £9 if you are transferring through telephone banking or via an HSBC branch. However, if you use the post, you will pay £17. There could be agency and intermediary bank charges as well that can weigh in on your transfer. Banks such as Westpac will charge you a fee of A$12 to receive your transfer. This should be paid by the recipient unless otherwise agreed.
On top of the transfer fees, HSBC will charge you an exchange rate margin of about 3.5%. For the AU$5,500 transfer, you’ll lose £100.50 in exchange. This could have paid for an additional night at a high-end hotel.
Barclays Bank charges a £25 fee when you make an international payment over the phone or through one of their UK branches. Depending on the arrangements with the holiday booking company in Australia, you may decide to share the transfer costs or pay them from your end.
Again, your recipient will be charged a fee to receive the money in Australia depending on their bank. Barclays UK will charge you an exchange rate margin of about 2.75% which gives a total of £78.65 in monetary terms.
If you choose NatWest to make your payment, you’ll pay a fixed fee of £22 in addition to intermediary and correspondent bank fees which can go up to £10. However, if the fees were the only reason, NatWest would still be affordable.
The challenge comes when you consider the impact of exchange rates on your transfer. NatWest charges a 4% exchange rate spread. This means that you’ll lose about £114.40 when exchanging your sterling pounds to Australian dollars.
Lloyds Bank allows you to send up to £100,000 per day. For your transfer to Australia, the bank will charge you £9.50 and a correspondent bank fee of £20. This brings your total transfer fee to about £30.
In addition, the bank charges tiered exchange rate margins. Your transfer of AU$5,500 falls under their lowest tier where you’ll pay an exchange rate margin of 3.55%. This will translate to £101.53.
Having seen what the banks charge, in transfer fees and margins you can now switch gears and look at how much the same transfer will cost you when you send via Paysend. When sending AU$5,500 to Australia, Paysend charges you a total transfer cost of £46.57. This includes all the fees and the exchange rate margin. Compared to banks, you save over 50% of the transfer cost.
Therefore, as an expat, you need to be careful about how you send money to your family, friends, businesses and other causes abroad. Always check that the provider you choose supports transfers to your destination. The delivery times are super important as are the exchange rates and transfer fees that you will incur in the process.
Banks have the benefit of established networks with time-tested money transfer practices. However, these aspects can be tempting, especially if you haven’t compared what other providers like Paysend charge for similar transfers.
Additionally, fintech companies have a variety of payout options in addition to bank transfers such as card-to-card and mobile transfers. These options give you convenience, speed, and the flexibility you need for your transfer.
Jonathan is the founder and editor of MoneyTransfers.com. Jonathan is highly experienced in the currency transfer market, having previously worked in the FX trading industry, alongside being an avid traveller. Using his knowledge he identified a need for transparency and further education to help people save money on their money transfers, leading to the creation of MoneyTransfers.com