International wire transfers can be effective, quick and even cheap, but there are problems that can cost you time and money.
There are a number of problems that can occur when sending an international money transfer. According to www.nerdwallet.com, here are some big ones to avoid:
Getting account details wrong
Many international money transfers require bank account and routing numbers for both the sender and receiver. But these details aren’t always straightforward. The account and routing numbers, which together identify the bank accounts on either end of a transfer, have formats that vary by country. For instance, American banks use nine-digit routing numbers and various lengths for account numbers.
“Sometimes people transpose the account number and the routing number,” says James Dowd, financial advisor and managing director at North Capital Incorporated in San Francisco.
Not checking the estimated delivery time
Not all transfers go at the same speed, especially overseas. Non-bank providers sometimes offer more than one payment method and delivery option, which can impact the speed of a transfer. Paying with a debit card usually speeds up delivery, for instance, but it can be more expensive than a direct withdrawal from a bank account. To avoid the long processing time of bank-to-bank transfers, you can wire cash through Western Union and MoneyGram locations, which generally takes minutes.
In contrast, banks have limited payment and delivery options. They charge your bank account directly and send only to another account abroad, while other providers have broad networks of cash pickup locations. If you need money to get somewhere quickly, using a non-bank service is often faster.
Knowing your options in terms of providers, cost and delivery speed will help you send money the way that best suits you, as long as you get the transfer details right, too.
Not converting dollars to foreign currency first
When you make an international transfer, you start with dollars and you expect the right currency to arrive to your recipient’s bank account. If you skip converting on your end, the transfer can be rejected at the other end, or the foreign bank may convert the money at a higher exchange rate or for a fee. This can put a strain on the recipient, especially if it results in delivery delays or the person receives less money than expected.
Mixing up fees
There are two main costs when sending international money transfers. The first is the service fee providers charge for sending money. The second is what you end up paying to change dollars into the currency of the country you’re sending money to. This cost depends on the foreign exchange rate between the two currencies, say dollars and Mexican pesos, which differs by provider.
Banks and other providers generally mark customer exchange rates up to make a profit on a transfer.
For example, a bank may receive euros at a rate of $1 to 0.89 euros, meaning $1,000 will be 890 euros. When you transfer $1,000, though, your bank gives you a less favourable exchange rate of, say, $1 to 0.86 euros, meaning you’re sending only 860 euros. That’s 3.4 per cent less, and the transfer will cost you the equivalent of $34 on top of the bank’s fee.