There is a growing number of freelancers and small businesses working remotely and with international clients, suppliers and services, international money transfers have become a reality. Remote work can be convenient and cost effective, but there can be a downside when high fees and exchange rates come with billing for that work.
You have several options to send and receive money, including:
- Bank wire transfers: Major U.S. banks offer international wire transfers as a way to electronically make payments to or from another person’s bank account. It’s one of the safest ways to transfer your money between countries.
- Money transfer providers: Independent money transfer companies offer currency exchange and international payments to people and companies worldwide. A few of the more popular digital providers include TransferWise, OFX, Payoneer, World First and HiFX.
No matter how you choose to send or receive money internationally, you’ll need to be aware of how these providers make money on international money transfers. The two main ways that providers turn a profit on these transfers are by charging fees and by “padding” the exchange rate:
- Most providers charge either a flat amount for each transfer or a percentage of the total you’re sending abroad. For larger business payments, you’ll save more by paying a one-time fixed charge.
- Exchange rates. A sneakier way these services make money is by adding a margin to the mid-market rate — the rate that the providers use when trading among themselves. Even if a provider claims to be “commission free”, it likely skews the exchange rate to get more money out of you.
Using a wire transfers
Transferring money internationally through a wire is a secure way to transfer money internationally. However, while banks are convenient, there’s a big drawback: cost. The exchange rates they offer are generally disappointing. Couple that with frustratingly high fees that can reach $50 per transfer, and your everyday payments will become quite costly.
Tips for saving money when doing an international money transfer with a wire:
- Use the same bank: If you and your clients hold accounts with the same international bank, you may be able to make transfers between accounts for low or no fees.
- Estimate your costs beforehand: Wire transfer services often offer deals and calculators to show estimated costs, but they don’t always include what they’re making on the exchange rate.
Using a money transfer provider
Foreign exchange companies typically offer stronger exchange rates and lower fees than your local bank. These companies may also offer foreign exchange alerts and tools that allow you to set your desired exchange rate for future transfers.
Tips for saving money when making payments with a foreign exchange provider:
- Compare fees and rates: Find a company that offers fee-free transfers and rates that are close to the mid-market rate.
- Ask about “hedging” options: Some providers offer flexible tools like limit orders and forward contracts that allow you to lock in a favorable rate, protecting your international payments against the rapidly fluctuating market.
- Automate recurring payments. You can often set up a weekly, monthly or quarterly payments to bank accounts and businesses around the world — sometimes with reduced costs.
The future of international money transfers
With ever-changing technology, transferring money is becoming easier and safer. A part of that technology is digital currencies like bitcoin. Bitcoin uses a transfer system called the blockchain, a kind of public digital ledger that records digital transactions. Is the blockchain a way forward for remote workers?
A benefit of using bitcoin and other cryptocurrencies is that they help people avoid the typical downsides to transferring money internationally, including high transaction fees. At the moment, unfortunately, transferring money through bitcoin is more complicated and expensive than a traditional money transfer, and the process involves a few more steps.
Until digital currencies and the blockchain become more common, your best option is to compare a range of money transfer providers available to you. By assessing the rates, fees and services of your available options, you’re sure to find a bank or provider that can give you a leg up on your international payments.
By Lexi Mills
Managing Director at Marquis Communications and Consulting VP for Manyminds
Lexi Mills is a multi-award winning digital marketing expert, specialising in integrating PR and SEO at both a strategic and tactical level. Her research work focuses on the opportunities, ethics and risks of machine learning and AI within the sector of internet search.
Lexi combines technical search algorithm knowledge and psychology to create data-driven measurable communications strategies that maximise influence on human behaviour. She applies this to external and internal communications strategies.
She has been part of core teams responsible for the communications, marketing and investment strategies of clients and agencies for over eight years. She focuses on e-commerce, music and technology sectors. Working with start-ups, SMEs and big brands across the US, UK, Europe and African markets in both the B2B and B2C environment.