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Bank wire transfers, which are the most common way to send money internationally, come with various hidden charges:
This naturally makes business owners wonder if there is a cheaper way or what are the best rates for international money transfers.
In this article, we discuss the various options available (including the lesser-known ones) and help you get the best rates for transferring money abroad. Firstly, let’s start with the basic question:
Domestic wire transfers are mostly free or cost considerably less than international wire transfers. This is because sending or receiving money internationally is complicated by various laws, regulations, currency exchanges, anti-money laundering acts, etc. Here are some of the reasons why international money transfers cost more than domestic money transfers:
Banking and Processing Fees: Banks and money transfer services incur costs in processing transactions, maintaining security, and ensuring compliance with regulations. These expenses often lead to fees charged to consumers.
Exchange Rate Markup: Banks make money by taking a small cut when exchanging currencies, it may not be very noticeable in small transactions but as the transaction value increases, the unfavorable exchange can become a problem.
Network Fees: Many money transfer services use a network of intermediaries or the SWIFT network to facilitate transactions. Each intermediary may charge a fee for their services, which can accumulate and contribute to the total cost of the transfer.
Customer Service Expenses: Helping customers with international transactions needs staff, training, and equipment. These lead to costs, usually charged to customers in their fees.
When making international money transfers from India, fees between 1-3% are considered normal. Anything about 3% of the total value sent or received, and you are paying too much. Similarly, anything below 1% and you’ve got yourself a good deal. This brings us to the crux of this article -
Interactive Brokers are an international brokerage firm, that can used be used to send money internationally for as low as $2 USD per transaction (up to USD $100,000). It is a relatively unknown method of transferring money overseas.
How to use an Interactive Brokers account to send money abroad?
Firstly, sign up for an interactive brokers trading account. As they are an international brokerage, they allow the transfer of funds from your Indian account to any overseas account at 0% fees. However, the currency still needs to be exchanged and you can use Interactive Brokers to get live or future exchange rates as needed (with 0% mark-up). This ends up providing the best rate of sending money internationally, but it is complicated and time-consuming. You can read more at: https://www.expatfinance.us/general/ibkr-money-transfers
Drawbacks:
Karbon Forex is a dedicated forex service that specializes in providing competitive rates for international money transfers. It is a tech-enabled and modern platform that allows you to send and receive money online as well as through dedicated relationship managers. It costs less than 1% of your transaction value and uses live exchange rates.
How to use Karbon Forex to send and receive money internationally?
Simply create an account, upload your invoice and supporting documents, and wait for Karbon Forex to process the transaction. Karbon is a neo-bank with a focus on international payments, so you can get all the support you need in terms of documentation and managing international regulations.
Drawbacks
Wise, previously called TransferWise, is a well-known online service for sending money worldwide. It changed how people send money overseas by offering clear pricing and using the middle exchange rate. This makes it a smart choice for personal and business transfers. Rates range from 0.5-1.5 % depending on the currency, amount and payment method.
How It Works
It’s a simple online platform where you create an account and mention the amount to be sent. Wise exchanges the money at the middle rate and moves it through its network of local accounts, which reduces costs. The person receiving the money gets it in their local money.
Drawbacks
Using crypto for sending money across countries is gaining popularity, especially among tech-savvy entrepreneurs. It often has lower fees and instant transfers. The rates for international money using cryptocurrencies are highly volatile, currently, it charges 0.000013BTC 0r $0.8 USD per transaction.
How It Works
Users convert their local currency into a cryptocurrency (like Bitcoin or stablecoins) and then transfer it to the recipient’s wallet. The recipient can then use a cryptocurrency exchange to convert the cryptocurrency to his desired local currency.
Drawbacks
Bill payment services, such as Bill.com, provide a way for businesses and individuals to pay bills internationally. This method is particularly useful for companies needing to pay overseas suppliers or contractors quickly and efficiently. Transaction fees vary based on the payment amount and destination.
How It Works
Users can sign up for a bill payment service and link their bank account. They can then schedule payments to international vendors or service providers, with the platform handling the currency conversion and transfer process.
Drawbacks
While it may not be possible to transfer money for free, understanding the factors influencing costs can help you make informed decisions.
Finding the best rates for international money transfers relies on careful consideration of the method you choose, the amount you’re sending, and the destination.
Key factors include bank charges, exchange rate increases, payment method, and country destination.
Some services might offer free transfers as a promotion, but usually, there are costs due to different expenses.
Keep an eye on rates, use services with live-market rates, and stay flexible with when you send money. Currency hedging is another option for advanced users.
Most well-known services use strong security. Always learn about the company and read reviews before sending money.
Online services often transfer money fastest, sometimes right away, but it depends on the service and the country.
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