Maybe you’ve just moved to a new country and you need to transfer money from your old bank account to your new bank account. Or maybe you have a family member or friend you need to send money to, or a payment you need to make. Regardless of the reason, you want to find the cheapest way to send money abroad. Here we will explain the different ways to transfer money internationally, and the cheapest way to do it.
Table of Contents
- Different Ways to Send Money Abroad
- What is a foreign exchange (forex) transfer service?
- What is a remittance service?
- What is a bank wire transfer?
- What is the mid-market rate?
- What is the cheapest way to send money abroad?
1. Different ways to send money abroad:
- Foreign Exchange (forex) Transfer Services
- Remittance Services
- Bank Wire Transfer
Forex transfer services are almost always the cheapest way to send money abroad. On the other hand, remittance services and bank wire transfers the most expensive methods of sending money abroad. This is because bank wire transfers and remittance services charge you many unnecessary fees.
2. What is a foreign exchange (forex) transfer service?
A forex transfer service is the cheapest way to send money abroad. To use a forex transfer service, both the sender and the receiver need a bank account. Unlike remittance services, you cannot send money just with cash. However, the forex service TransferWise has something called a borderless account. A borderless account is a bank account you can open through TransferWise online. This is a great option if you do not already have a bank account, but need to transfer money since forex transfer services are the cheapest way to send money abroad.
With forex services you can transfer money between countries with the same or different currencies. If you transfer money between countries with different currencies, the forex service will use an exchange rate to convert the price of the transfer.
Forex services are significantly cheaper to use than remittance services and bank wire transfers because forex services do not markup the exchange rate. All three methods of sending money abroad, however, charge a small fee.
The benefit of using a forex service is that you know exactly what you’re paying for since they do not mark up the exchange rate. You can see the fee. Forex services are more transparent about what you’re paying for when you make a transfer.
* A really good bank for expats is N26. Everything is in English and there are no fees on foreign transactions. We also use N26 as our bank. You can click here to read more about N26 and different banking options for expats in Germany.
3. What is a remittance service?
The first thing you should know about remittance services is that they are not the cheapest option for sending money abroad. Some people will consider using a remittance service to send money abroad if the recipient doesn’t have a bank account. For instance, you can send money through Western Union, and the recipient can pick up the money in cash at any Western Union location. MoneyGram works the same. With remittance services, you can use cash or money from your bank account to send money abroad. With forex transfer services and bank wire transfers, you cannot use cash.
The downside to using remittance services is that they’re more expensive than forex transfer services. Remittance services cost more because they charge you a flat rate for the transfer, in addition to marking up the exchange rate. Western Union even states in their Legal Disclaimer that they make money from the currency exchange rate they give you.
4. What is a bank wire transfer?
A bank wire transfer is almost always the most expensive method of sending money abroad. Banks charge a flat fee for sending money abroad. What makes banks really expensive though is the high markup they add to the exchange rate.
Banks won’t tell you that they’re adding a high markup to the exchange rate. You should pay careful attention to the exchange rate the bank gives you. The banks keep the difference between the exchange rate they charge you and the mid-market rate. They’re sneaky and will make money off your transfer without being transparent about how they’re doing it!
5. What is the mid-market rate?
The mid-market rate is the most fair exchange rate you can get for transferring money abroad. You might see it called the interbank rate. It is the midpoint between the price the buyer is willing to pay for the currency and the price the seller is willing to sell the currency. The mid-market rate is constantly fluctuating.
When you send money abroad, you want to choose the transfer method that offers you the true mid-market rate. Banks will give you an exchange rate that is higher than the true mid-market rate.
Do your research before you transfer money abroad and find out the true mid-market rate for the currencies you’re transferring money between! It’s easy to find the true exchange rate just by searching on Google.
For instance, you can type into Google, “Current exchange rate between the UK pound and euro.” Google results will show you how many UK pounds you can get for 1 euro. Like I mentioned before, the mid-market rate is always changing, but Google will show you what the current rate is. We use TransferWise for many reasons, but one of the top reasons is because it always uses the mid-market rate.
6. What is the cheapest way to send money abroad?
TransferWise is the cheapest way to send money abroad, especially if you use this link. By using that link you get a fee-free transfer of up to 500 GBP!
The cheapest way to send money abroad is through the forex transfer service TransferWise. It’s the service we use, and it’s the service we recommend.
TransferWise is your best option because they use the mid-market exchange rate. They don’t mark up the exchange rate like banks and remittance services do. TransferWise charges you a small fee which they calculate using a percentage of the amount of money you’re transferring and the currencies you’re using.
You can create a TransferWise account for free and the recipient of your transfer does not need to have a TransferWise account. You use your credit card, debit card or your local bank account to pay for the transfer.
Not only is TransferWise the cheapest way to send money abroad, but it’s also one of the easiest ways to send money abroad. With TransferWise, you can see how much it will cost to send money abroad. Many banks and remittance services will make you create an account to see their fees and exchange rates. TransferWise will let you see it without having you make any commitment to them.
TransferWise is fair and transparent.
In January 2018, a 3rd party research company Consumer Intelligence conducted an independent study on TransferWise and 21 other banks that offered transfer services from around the world. The study looked at whether or not making an international money transfer through TransferWise was truly cheaper than through other banks. The study found that it was significantly cheaper to send money abroad using TransferWise. In Germany, the study found that you save up to 4x more using TransferWise to send money internationally than through the German banks Deutsche Bank, Postbank, and Sparkasse. In the UK, the study found it’s up to 9x cheaper to use TransferWise to send money internationally than to use UK banks Barclays, NatWest, and Lloyds Bank.
*Full Disclosure: Some of the links we use on this website are affiliate links. By using those links, you help keep our website free. There is no additional cost for you. We also want to note that we only recommend services we trust and that we would use ourselves.