When transferring money overseas the first effective factor to consider is the amount of money that is to be sent, as this can directly affect the method to choose for the transfer. Below, we will look at the two likely situations.
A. Sending Small Amounts:
Sending small amounts of money overseas means that the currency exchange rate will not be the most important factor in the transfer and one could save money by choosing commission-free or low-commission services which are fast and secure. Although the presence of a bank account on either end means that funds can be transferred through international wire transfers for a small transfer fee (£10-35) and usually commission-free, the bank-to-bank transfer of money can take from 1 day to several weeks depending on the service you choose. You will have a choice of wire transfer (1 day to complete, most expensive), cheque (5-7 weeks and relatively expensive), Foreign Draft (3 weeks and relatively cheaper) and money order (5 days and quite cheap).
When sending a cheque abroad the recipient will need to pay the processing fee and it will take about 4-6 weeks. Even though it’s easy to issue a cheque to transfer money overseas, it may not be easy for the recipient to cash the cheque, especially with some countries having banking systems which tend to be less welcoming towards foreign-drawn cheques.
Foreign drafts can take from a few days to a week to be prepared by the initiating bank, depending on the city or town it is in. The money comes out of the account when the draft is prepared and not when the recipient gets it. Since the draft is drawn on your bank to another bank, the recipient must have access to the corresponding bank in order to cash the draft.
Wire transfers can be initiated without the need to be a customer of the bank, for an extra charge, provided the money is paid to the bank in cash. Although wire transfer is the most expensive type of bank transfer it tends to be much faster and more secure, but the recipient still needs to have access to the corresponding bank.
While bank transfers may not provide for the most cost-effective international money transfer method, they have the advantage of being able to transfer money overseas to almost all countries, a limitation set by many other services.
This all was possible with the presence of a bank account on either end, but many cases of international money transfer do not actually involve a bank account on either end. For such types of transfer, i.e. cash transfers, customers must refer to international money transfer companies such as Western Union, MoneyGram, and Travelex. WESTERN UNION, MONEYGRAM, AND TRAVELEX
Western Union is known to be the leading service for international money transfer where there is need to transfer money overseas in cash or without involvement of a bank. Western Union has been in business since the early days when it would send wire transfer on actual wires using telegraphs, contributing towards the remaining name for today’s ‘wire transfers’ now referring to electronic exchange networks. Western Union uses its many 245,000 many transfer agents in over 200 countries to send and receive money abroad. A customer takes cash to a local money transfer agent, fills-in a form detailing the recipient’s name and the destination country, and pays the money to the agent. This agent will then inform the recipient agent about the money transfer providing them with the same transaction code given to the payee. Meanwhile the payee will have contacted the payment recipient and provided him/her with the transaction code. This code is then used by the recipient to collect the money from the money agent residing in the destination country. The whole process could take as little as 20 minutes depending on the two countries.
Although Western Union is known to be a very fast and secure international money transfer service, it is also known to give customers a relatively poor exchange rate as well as having high-rate commissions. That being the case, Western Union is now finding increasingly new rivals in the business including MoneyGram who claim to have cheaper rates compared to Western Union.
MoneyGram being one of the main rivals of Western Union operates in over 170 countries through more than 75,000 outlets. One must, however, bear in mind that despite the claim to have cheaper rates than Western Union, the actual cost of any one transaction may be either higher or lower than that offered by Western Union.
Founded in 1976 by Lloyd Dorfman, Travelex is the world’s largest non-bank foreign exchange payment company serving over 29 million customers in 29 countries each year. Countries include United States of America, Canada, United Kingdom, Malta, Netherlands, Belgium, Germany, Switzerland, Finland, France, Czech Republic, Italy, Bahrain, Oman, Hong Kong, Singapore, Indonesia, Thailand, Australia, and New Zealand.
About 40 percent of the world’s airline passengers now pass through airports at which Travelex operates its retail foreign exchange branches, including the major gateways at London, New York, Hong Kong, Frankfurt and Sydney.
In Jan 2006, Western Union signed an exclusive global agreement with Travelex. Travelex locations will now only offer the Western Union Money Transfer service, making it available at 650 of their 700 retail locations in city centres and across 97 airports worldwide. The agreement marks an important milestone in the ongoing expansion of the Western Union global network. The addition of Travelex, in particular locations at the world’s leading airports, extends Western Union’s connection to the more than 185 million people living outside their country of origin.
Recently, these companies have introduced a good online service that provides for estimating the transaction costs as well as making it possible to transfer money overseas through their websites and online. This has also eliminated the need to pay-in by cash, where credit/debit card payments have also become an alternative. Payment collection must however be done in-person, except in some countries where Travelex will transfer cash to a bank account instead.
All the above companies tend to pose restrictions on the amount of money that can be sent per transaction, although it is highly discouraged to send large amounts of money overseas through these companied due to the poor exchange rates they give their customers. Alternatively, in the case of large transfers, it is suggested to transfer money overseas through Forex Brokers. B. Sending Large Amounts:
All the services and companies mentioned above are known for giving their customers substantially poor exchange rates and hence less value for money. A single percentage of difference in exchange rates would mean hundreds of thousands of dollars of difference in the final price, where large amounts of money transfer are in place.
In such cases it is best to refer to specialist international currency companies that are part of the forex who usually tend to provide better exchange rates, generally commission-free, due to their competition with the leading dealers in the foreign exchange market (Forex).