When it comes to sending money around the world, we like to keep things simple. That’s why we’ve created this comprehensive, easy-to-understand guide that tells you everything you need to know about international currency exchange. We’ll break down all the key areas you need to know about so you can understand the money transfer process and get your cash to go that much further.
Let’s get into it.
OVERVIEW: Transferring Money Internationally Between Bank Accounts
Currency exchange and international money transfers refer to the same thing — sending or receiving money between countries and currencies. You make an international money transfer when you want to send or receive funds from your account to a recipient in another country, whether that’s an individual or a business.
Money transfers always takes place between “currency pairs” — you are converting money from one currency into another. There are several ways to make international money transfers — through your bank, via PayPal, or using a dedicated currency exchange provider. All of these services charge variable fees and provide an exchange rate that will likely be slightly worse than the standard, interbank rate.
Once you have decided how to send your money, you enter details of the recipient and fund your transfer. Your money will then be converted into the new currency and paid to the recipient.
That’s it — now we’ll dig into the details of international currency exchange.
The Different Types of Money Transfer Providers
There are three main ways you can send and receive money internationally.
- Via your bank — almost all banks provide currency transfer services. You can take advantage of these by going into a branch, while some banks also provide online or telephone facilities for sending money internationally.
- Through PayPal — you can easily send money via PayPal — you just need the recipient’s PayPal email address and can decide to send money to them. PayPal will levy fees and then exchange the money into the new currency before transferring to the recipient’s PayPal account.
How to Find the Cheapest Way to Transfer Money Overseas
Compare The Total Cost
The total cost of the transfer comes down to 2 things:
1. Transfer Fees
Every Australian bank and money transfer company will charge you a different fee to send money overseas. Usually it’s between $10 and $32.
2. Exchange Rate Margin
There is no “standard” exchange rate. Each bank will offer you a different exchange rate based on the currency you want to send overseas and the amount you need to send.
- Using a specialist currency transfer company — there are several businesses specifically set up to provide low cost money exchange at good exchange rates. These will let you transfer money directly into the recipient’s bank account using their online services and call centers. Some currency exchange providers like Western Union and Moneygram let the recipient collect their funds in cash.
Fees to Transfer Money Internationally
There are a few factors that impact how much the recipient will get when you exchange money. The main areas are:
- The currencies and countries you are moving currency between — different currency pairs have different exchange rates.
- Fees levied by the currency exchange provider — different banks and providers will levy different fees.
- The difference between the base exchange rate and what the currency provider offers you — you are unlikely to get the “mid-market / interbank” exchange rate. Instead, the rate you will get is often one or two percentage points worse than that rate.
- Fees levied depending on how the exchange is funded — some providers will charge you a fee if you fund the transfer in certain ways.
- Recipient bank fees — some banks charge additional fees when funds from a money transfer are paid into an account.
- The fees charged by the money transfer provider — different providers charge different fees, both as a flat rate and as commissions.
The Best and Worst Fees by Money Transfer Providers
In all cases, PayPal and the banks will charge you higher fees and offer you worse exchange rates than specialist currency providers. This can significantly reduce the amount of money the recipient gets, often by as much as five percent.
Here’s a quick comparison, sending $10,000 AUD to the US and converting into $USD.
- The midmarket rate means that the recipient would get $7,563 USD.
- A specialist currency exchange provider would send the recipient around $7,520 USD (0.6% lower).
- ANZ Bank would send the recipient $7,230 USD (4.5% lower).
- Westpac bank would send the recipient $7,145 USD (4.6% lower).
- PayPal would send the recipient $7,110 USD (6% lower).
This is as a result of fees levied by the banks and PayPal, and the poorer currency exchange rates that they provide.
We always recommend using a specialist money transfer provider. We have an easy-to-use money transfer calculator that will tell you exactly how much you can save.
Using a Specialist Currency Exchange Provider
There are several major currency exchange providers including Transferwise, OFX, World First, TorFX, and HiFX. All of these providers can save you money and make sure your recipient receives more funds than if you were to use a bank or PayPal.
Once you have decided which specialist money transfer service you want to use, you just need to create an account with them. This takes around ten minutes and you can complete the signup process online. Once that’s done you can use their online currency exchange portal to send money to the recipient, fund your transfer, and have the cash in the recipient’s account within a couple of days.
Advantages of Currency Exchange Providers
There are several advantages to using a specialist service to transfer money internationally:
- Lower fees than PayPal or banks.
- Fast transfers, money can sometimes be transferred within one working day.
- Dedicated customer support and advice.
- Online options for sending money through their website or app.
- Forward or limit orders to manage risk and reduce market fluctuations.
- Mobile apps and other tools to manage the money transfer processes.
- In some cases, local pickup is available for the recipient.
How it Works: International Money Transfer Process
- Use our comparison tool to see who can offer you the best deal.
- When you’ve decided on a provider, just visit their website directly from our tool.
- Create an account with the currency provider — you will generally need a proof of identification and a proof of address (drivers license, bills).
- Get an up-to-date quote for transferring between currencies.
- Arrange your transfer using their online service or over the phone. If you call up, they will generally provide a dedicated account manager.
- Provide details of the recipient receiving the money.
- Send money to your currency provider by funding your account, normally by bank transfer or debit card.
- Your currency provider will make the exchange and deposit funds into the recipient bank account.
- The recipient can then do what they need to with the transferred money.
And that’s it — our simple and complete guide to sending your money around the world. Just remember, using a specialist money transfer service could save you hundreds or thousands of dollars, and they make money transfers quick and easy.
Entering Recipient Details
You will need to provide details of the person or business that you’re transferring money to. Generally, a money transfer service will need the following information:
- The recipient’s full name and address.
- Their bank’s name and address, and the recipient’s bank account number.
- The SWIFT BIC (Bank Identifier Code) or Branch Number (some countries accept this) of the recipient’s bank.
- The IBAN (for payments to Europe and selected other countries) or Routing Number (for payments to the US).
Funding Your Transfer
Once you’ve entered all the necessary details, you will need to fund your transfer. Depending on the provider you’ve chosen, you could fund your currency exchange via bank transfer, bank draft, credit, or debit card. When you’ve made payment, the money transfer specialist will let you know and they will convert the funds.
Payment Made to the Recipient
Once funds have been converted they will be sent to the recipient’s bank account. The whole process generally takes between one and three business days. The recipient can then withdraw their money or use it through their normal bank online portal.