Whether you want to transfer money between bank accounts here and overseas, or pay the mortgage on your second home abroad, expats have more options than ever to do so in person, online, or with a quick phone call.
That said, paying bills abroad or sending your money overseas isn’t the same experience everywhere. Whether you use a bank, a credit card, a foreign ATM machine, or an international payments company, each one of these channels has its own set of fees and charges.
That’s why it’s important to know the pros and cons of using each. So let’s run through them here:
Fair: Using credit cards and foreign ATM withdrawals
Perhaps the most convenient way to pay for things where you’re working abroad (let’s call this your “working country”) is by using the plastic cards already in your wallet. Let’s say you have a credit or debit card tied to your bank back at home overseas. When you use the card in your working country to pay for expenses, your home bank tied to the card will instantly convert your home currency into your working country’s currency and the payment is done.
That convenience comes at a high price though. A 2015 survey by CreditCards.com found that credit card companies typically charge a foreign transaction fee from 1 to 3 percent of the transaction amount – which could mean a $10 to $30 fee for every $1,000 you spend overseas. Even worse, if you use a credit card at your working country ATM to take out cash, you’ll typically have to pay high interest rates for a cash advance on top of a possible ATM network and currency conversion fees. You also can’t feasibly use credit cards to send money internationally.
Better: Transfer with a bank (international wire transfer)
Banks are a popular option for those who like to do international transfers in person, and many also let you transfer online or via a signed fax. All you need before you head to the bank is the swift code, ABA (American Bankers Association number), or IBAN (International Bank Account Number) that’s tied to the receiving account. Once the wire transfer is placed, it usually takes one to three working days to have your money sent to an account overseas.
But bank fees for international transfers can be relatively high too, especially if you’re sending money home frequently. A 2016 Nerdwallet survey found that US banks charged an average of $42 for an outgoing international wire transfer – and there was sometimes a fee on the receiving bank’s end, too. That means if you were to send money each month using a bank, you could rack up more than $500 in transfer fees by the end of the year!
Best: Transfer with an international payments company
Expats can often save money on overseas transfers by using an international payments company, which may offer more competitive exchange rates than banks and charge very little (or no) fees. World First USA, Inc. (World First), for example, charges just $10 to transfer up to $10,000 to an account overseas, and doesn’t charge a fee for international transfers larger than that.
International payments companies can also give you more control over your money transfers. For example, if I regularly send $3,000 to my family in the UK each month, I can use a “forward contract” to lock in today’s pound-to-dollar exchange rate for up to three years. This would help ensure that my family doesn’t financially suffer if the pound weakens over the next few months (or years).
Additionally, you can get your desired currency exchange rate and maximize the amount of your transfer by using an international payment company’s rate alert service. Let’s say you want to send money back to your family in Europe. If euros cost $1.10 each, but you want to wait until they’re trading at $1.08 before you transfer, a rate alert service could notify you if/when euros fall to your preferred exchange rate. In this example, that seemingly small difference in exchange rate could allow you to send an extra €17 for every $1,000 you transfer – so you’re getting more for your money.
In a nutshell: credit cards and banks may offer convenience at a premium, but international payment companies can offer you more competitive exchange rates and flexibility.
Want to potentially save hundreds on transfer fees, get personalized service, and stretch your money as far as it can go? See how we give you a better way to send money home or pay bills overseas.