While there are many different ways to make overseas payments, one of the most popular methods is to use a money transfer service. It’s easy to see why.
Not only are money transfer services typically much less time consuming in contrast to alternative options such as wire transfers, they tend to be cheaper as well.
Nonetheless, ‘cheaper’ does not exactly translate to cheap, and it will cost you money to send funds internationally with a money transfer service.
Here are the primary costs you will ensure while using a money transfer service:
The first cost you will incur is that of a fee to complete the transfer. The vast majority of money transfer fees will charge a small percentage rate of the transfer, usually between 1-5%. This is in contrast to bank wire transfers, which typically charge a flat fee.
The good news is that you will ultimately pay less to send money with a percentage rate versus a flat flee. For example, let’s say that you’re sending $500. Even if you pay a fee of 5%, that’s still only $25 in contrast to the $40 to $80 you’d likely have to pay to do a wire transfer.
The exchange rate refers to the amount of the foreign currency that is generated for each U.S dollar that you exchange. The exchange rate is always shifting not only by transfer service but several times throughout the day as well. This shift reflects the changes that are going in in the international currency market.
The reason why the exchange rate matters is because you’ll likely have to pay a small margin of the total rate. This is another reason why the exchange rate will differ between services, because they adjust it in order to make money for each transfer.
Your best bet would be to go with a transfer service that gives you a guaranteed exchange rate versus an estimated one.
Finally, your recipient may have to pay money to receive the funds just as you had to pay money to send them. In almost all instances, it will be a flat fee of around $10 to $30.
It’s just something to be aware about and you’ll want to confirm that your recipient knows about it. Depending on the agreement you have with them, you may need to reimburse them for this fee, and if so it’s another expense that you’ll need to add up.
Costs of Using A Money Transfer Service
The good news is that now that you know all of this information, figuring out the least expensive transfer service in your area should be very easy. Fees and exchange rates vary greatly by company, oftentimes your choice will come down to a service with a high exchange rate and low fee or one with a high fee and low exchange rate.