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How to shop for money transfer services
When sending money, you want to be sure your money will arrive safely without paying a fortune. This guide explains how money transfer services work, how to compare money transfer companies, and the secret to getting the best deal possible.
Ten years ago, transferring money was slow, inconvenient, and expensive. To fill out the necessary forms for a wire transfer, you’d have to go (in person!) to your bank or the closest Western Union station, wait in line, and fill out a pile of paper forms.
Today, it is relatively easy to transfer money. Whether you want to send money to a friend sitting next to you or a family member halfway around the world, you have options. Some companies even offer special deals that allow you to send money for free. Many companies exist exclusively to facilitate money transfers, and most banks have digital transfer options available on their mobile app or website. Western Union has also streamlined its process by providing channels to transfer funds digitally.
But even these streamlined transfer processes often hide costly fees.
The 5 types of money transfer services
The type of money transfer service you use will determine what options you have and how much you’ll pay for the service. Below are the five main categories.
Large traditional banks have robust money transfer services. However, they often charge high fees for international transfers and have a long transfer time.
Foreign exchange brokers are often used within the financial services industry. But they also offer services for individuals. They tend to charge competitive fees on large transfers. However, they might not be worth it if you don’t need to send a lot of money.
3. Online services
With low rates and several transfer methods, online services have become more popular in recent years. However, some do not offer many international options.
4. Blockchain networks
These services rely on blockchain technology, which is fast, cheap, and secure. The downside is that you’ll have limited options and may need to use cryptocurrency, which is notoriously volatile.
5. Cash services
If you prefer to physically send cash to another country, transfer services like Western Union, MoneyGram, and Ria make it possible to do so.
You’ll drop cash off at a physical location for someone to then pick up on the other end.
“Many people prefer these companies because they do not require a bank account to send money to another country,” says Matt Oppenheimer, CEO of Remitly. “The downside is that it comes at a steep cost due to additional fees.”
8 ways to compare money transfer services
The right money transfer service for you will depend on many things, including where you want to send the money, how much you’re willing to pay, and more. As you compare money transfer services, keep these eight factors in mind.
1. Exchange rates
If you’re sending money internationally, the money transfer service you use will convert the transfer from your currency to the currency of the recipient. Don’t take the rate offered at face value, though. Most money transfer services bake hidden fees into their currency exchange rate for processing the transaction. The fees can vary based on the service you choose. So, it’s essential to compare the exchange rates for the specific currency you need to convert to.
2. Transfer fees
You may have to pay a fee just to transfer your money, regardless of whether it’s sent overseas. However, most domestic money transfer services won’t charge you, unless you use a credit card or transfer money for goods and services. But if you’re sending money internationally, you’ll find that many services charge a transfer fee. So it’s important to compare fees based on the value of the service you’re getting. Note, however, that while some services can help you save money on fees, they might offer slower transfer times or poor customer service.
3. Transfer time
Also called remittance float, this is the amount of time it takes for your money to go from your account to the recipient. The recipient’s bank can add to the transfer time, but this shouldn’t affect your decision about which transfer service to use. “Sending money via cash or check can also cause serious delays before the money is officially transferred between parties,” says Oppenheimer.
If the recipient needs money in a hurry, consider a different route. Keep in mind, though, that the fastest transfer service isn’t always the cheapest. You’ll need to consider trade-offs when comparing options.
4. Customer service
The money transfer process may not always go as smoothly as you’d like. This makes it important to find a company with topnotch customer service.
If your funds disappear or you need help with a delay, for instance, it’s good to know beforehand that you’ll be well taken care of.
Specifically, you’ll want a service that offers 24/7 customer support across multiple platforms such as email, phone, and live chat. Also, look at reviews from current and past customers to see what type of experiences they’ve had with the service.
Don’t just look at general ratings, though. Instead, read a sampling of actual reviews. You may decide, for example, that some negative reviews shouldn’t affect your decision because they lack substance or owe to a random bad experience unlikely to be repeated.
Take the time to read at least a handful of both positive and negative reviews. This will give you a better idea of what you’ll be getting yourself into by choosing the reviewed service.
If you’re sending money abroad, it’s important to know which money transfer services have a footprint in the country to which you’re planning to send money. Countries where there are many transfers — including Mexico, India, and the Philippines — usually get a lot of coverage from money transfer services. But if you need to send money to a small country or one that doesn’t get as much coverage, you may have fewer options. If you’re having a hard time finding a company to transfer your money, resist the urge to go with the first service you come across. Take the extra time to find a few, so that you can compare other factors before choosing one.
6. Cancellation options
What if something goes wrong with a transfer or you change your mind? It’s essential that you understand ahead of time what options you have to cancel the transaction.
You may have to dig into the fine print or call the customer service team to get your answer. But it’s worth looking into, because you don’t want to be out of luck if your plans change.
In other words, don’t choose a money transfer service until you know when and how you can cancel the transfer.
7. Security and reliability
Most of the money transfer services you find online will be legitimate, but there are some scams out there. Here are three things you can do to check the security and reliability of a potential service:
- Check for reviews: If a service you’re considering is a scam or unreliable, chances are that other people have already discovered that. If you can’t find much about the service online, it may be best to move on just to be safe.
- Make sure the site is secure: When you’re on the service’s website, check the address bar. If it starts with HTTPS, the site is secure. If it just says HTTP, any personal information you enter on the website is at risk.
- Ask about how they handle security: Money transfer services usually have a page on their website dedicated to how they keep your information and money secure. Some might also share information about how to avoid scams. If you can’t find anything online, call the customer service team.
8. Promotions and discounts
Some money transfer services offer promotions or discounts to first-time users. Others will offer referral bonuses if you refer a friend to use the same service. As you’re shopping around for a money transfer service, look for these types of deals. While they may not necessarily make up for some negative factors, it could help you decide between two companies that provide similar services and costs.
Costs of various domestic and international transfer options
The above discussion of transfer types and key factors to consider gets you off to a good start finding the right service for your needs. This section tells you more about your domestic and international transfer options and what they’re likely to cost you. It also gives you some tips for minimizing these costs and avoiding certain hazards.
Person to Person (P2P) transfers
If you are transferring less than $10,000 to someone who lives in the same country, a P2P app like Skrill or Paypal can move your money in mere minutes. All you have to do is link the app to your debit card.
If you want to transfer between bank accounts, it can take one to three business days. It is generally free to transfer money between bank accounts. However, if you’re sending money as a personal payment using a debit or credit card, you’ll usually be charged a small transaction fee — often around 3–5% of the money sent. Prices will vary depending on which app you use.
If you don’t like the idea of sending money using an app on your phone and you want to transfer straight cash, there are companies that provide this service. Walmart, for example, allows you to transfer funds from one Walmart to another one in the country. To transfer cash in this way, senders simply hand over cash at a physical location. Within ten minutes, their recipients can pick up cash at the corresponding location in their area.
The transaction fee for cash transfers is fairly low. At Walmart, for example, customers pay $4.50 to transfer up to $50, or $9.50 for up to $950. Western Union, MoneyGram, and AccountNow are other companies that facilitate cash transfers.
Cash transfers are a good option when you only need to transfer a small amount of money, or when your recipient prefers to be paid in cash.
Bank to bank transfers
If you want to send more than the $10,000, a bank might be your best bet, such as Chase QuickPay. Bank transfers ensure security and speed, but as a result, their fees are higher. It costs an average of $25 to send money via your bank and $9 to receive it.
There are two fees to be aware of when you transfer money internationally: the upfront fee for the transfer and the foreign exchange margin.
Some online platforms allow you to transfer money internationally for a low upfront fee. WorldRemit, for example, has a $3.99 upfront fee for most countries.
If you’re looking to send more than $1,000, try the online platform OFX. OFX has a minimum transfer amount of $1,000 and charges no upfront fees on these transfers. Like TransferWise, though, delivery will take several business days.
If time is of the essence, MoneyGram and Western Union will get your money overseas the fastest — if you select a wire transfer, you’ll typically see same-day delivery. However, their fees are higher than those of the online platforms mentioned above.
Foreign exchange rate
If you’re transferring money from California to London, for example, you need to know what the dollar is worth compared to the British pound. If you sent a dollar to London today, the recipient would receive 77 cents based on the exchange rate. That could go up or down tomorrow.
Nate Masterson, Chief Executive Finance Officer for Maple Holistics, advises that you check the exchange rate before sending a transfer. “This is usually the main area where people either lose their money or wind up paying more to make the transfer than they had originally calculated,” he says.
Melita DeHazes, North American marketing director for OFX, says shopping around for the best currency exchange rate can save you hundreds or even thousands on sizable wire transfers.
“Banks often charge a margin of up to 5% above the daily interbank exchange rate. So when your bank tells you that you’ll get .89 EUR for every 1 USD, a simple Google search may reveal that the real daily exchange rate is closer to .85. That means that, on a $10,000 wire transfer to Europe, going with your bank may be costing you up to $400.”
The FDIC warns consumers to be wary when wiring money to strangers, especially in another country, because they could be scam artists. Because money is moved quickly with wire transfers, it’s an appealing avenue for crooks, who can get the money fast and then disappear.
The FDIC offers a few tips to avoid money transfer scams:
- Never wire money to people you don’t know. If you’re buying a product online, for example, pay through other, safer avenues.
- If you’re being pressured to send money right away, it’s most likely a scam.
- Never give out account numbers to someone who contacts you unsolicited via text, email, or phone.
No single money transfer service can do it all, so it’s possible that you might use more than one company for different needs. That’s especially the case if you do both domestic and international transfers. “Banks and services that offer domestic wire transfers tend to be cheaper and faster because they can be completed through one payment system,” says Oppenheimer. “But banks and services that offer international wire transfers can mark up the transfer fee and also give you a poor exchange rate, which will cause you to lose more of your hard-earned money.”
So, as you shop around for the right money transfer service, understand that you may need to utilize more than one to achieve different goals. And be sure to read the fine print to make sure there aren’t any hidden fees or other terms that can come back and bite you. Also, be sure to check the terms for each individual transfer you make. Since currency exchange rates constantly fluctuate, it’s important to know how your costs might change with each transfer you make.
And don’t forget: Before transferring your money, you should consider fees, timing, and security, just to name a few factors.
You’re already where you need to be to get started. SuperMoney’s detailed review page of the top money transfer services enables you to compare exchange rates and other key details side-by-side to find the best transfer service for you.