Did you know that nearly 50% of Australians were either born overseas or had at least one parent born overseas (ABS, 2016)? With so many of us having loved ones scattered around the globle, it's not surprising that the pre-Christmas period has become one of the most popular times for Aussies to send money abroad.
Thanks to technological advances and the sheer number of transfer providers available, sending money overseas has never been easier. But there are still some common mistakes you'll want to avoid if you are choosing to transfer money to family this Christmas season...
Mistake # 1 – Missing the deadline
Although sending money in lieu of gifts is certainly quicker, the process isn’t instant and will require some organisation on your end. Before you can open an account with an online money transfer provider you'll need to get your identity verified, which will require you to submit some ID docs. Once approved, the account needs to be funded. Funding options vary across businesses but could include local bank transfers, PoliPay or credit card payments. Between opening an account and the actual transfer period itself, it could take anywhere between 1-3 business days for your money to arrive at its destination.
Keep in mind that transfer times can be impacted by a number of factors, including the currencies involved, how much you are sending, where you are sending and the provider you choose. Consider also public holidays, time differences and weekends in both the receiving and sending country, as this can add on extra time. This year, 2018, you’ll probably want to have sent your money by Tuesday the 18th of December at the very latest (four full business days before Christmas).
Mistake # 2 – Not bundling your transfers
If you have more than one relative living in the same country, consider making one large transfer to a single recipient rather than doing multiple smaller transfers. Then arrange for that relative to distribute the funds via local bank transfers or cash.
Many providers, particularly banks, charge a flat transaction fee for each international payment. These fees can be as high as $30. For smaller transactions, that’s a significant percentage of the total transfer amount to be wasting on fees. Some banks also charge receiver fees for processing overseas transactions. Bundling your transfer will help your relatives save on these fees if they apply.
Another advantage of consolidating your payment is that some online providers will waive fees on transactions over a certain amount. You could avoid this cost entirely by choosing a provider that doesn’t charge any fees at all (although bank receiver fees would still be a factor).
Mistake # 3 – Not checking the details
Save yourself time and money this Christmas by making sure to check all the details of your money transfer PRIOR to finalising the transaction. This goes for recipient details as well as provider limits.
While some companies don’t have any transfer limits, more often than not there will be either a minimum or maximum transfer amount you’ll need to adhere to. For smaller transfers like Christmas gifts, you’ll want to pay attention to the minimum transfer amounts. These can be anywhere from $50-$250.
International money transfers will require specific information for every transaction, including full recipient name, address and all bank account details. For people who transfer money infrequently, these details are not always straightforward. For example, it’s easy to confuse a bank account number with a routing code, as formats vary by country. Entering the incorrect details for your transfer will cause unwanted delays, as the money will need to be tracked down and returned. It will also cost you; banks charge an amendment fee if you enter the wrong bank details and need to change the payment instructions.
Mistake # 4 – Only considering upfront fees
When making an international money transfer it’s critical to understand that there are two main costs involved: the transaction fee and the exchange rate margin. The former is the service charge providers levy for sending money. The second is what you end up paying to convert your money into the destination currency. This cost depends on the exchange rate between the two currencies, which will differ across providers.
What many people don’t realise is the exchange rate margin is where banks and provider make the most money off their customers. They do this by marking up the rate to make a profit on your transaction. Often these same companies are the ones advertising “fee-free transfers” to make you think that they will transfer your money at no cost. Wrong.
For example, the bank might receive euros at a rate of $1 to 0.6500, meaning that $1,000 would be 650 euros. When you transfer $1,000, though, your bank might give you a less favourable exchange rate of, say $1 to 0.6200 euros, meaning you’re only sending 620 euros. That’s 4.6% less, and the transfer would cost you the equivalent of $46 on top of the bank’s fees.
Mistake # 5 – Not comparing services
Choosing your bank by default for overseas transfers is understandable. There’s no disputing the convenience of simply logging into your online account to set up a transaction. But this ease of use masks an important factor – cost. Big banks generally offer the least competitive exchange rates, which means you are paying more out of pocket for your Christmas generosity.
The optimal strategy for finding the right provider involves shopping around and comparing the total cost of your transfers. This will include both the transfer fees (if there are any) and the exchange rate margin. Be sure to consider banks, walk-in money transfer companies, peer-to-peer providers and online money transfer companies in your research.
FlashFX is an online money transfer company that promises speed, security and savings. With zero transfer fees, bank-beating exchange rates and a simple sign-up process, we'll help you manage your gift giving this year with hassle-free international money transfers.