How to send large amounts of money overseas

• Specialist money transfer companies, direct bank transfers and bank drafts are the key options for sending large amounts overseas.
• Each of these has its pros and cons, as well as fee and cost structures.
• In addition to fees and costs, you should also compare the foreign exchange rates different banks and services offer to find the best transfer method.

Sometimes you need to send large amounts of money overseas. Whether you need to send $10,000 or $10 million or more, you can learn how international money transfers work and how to get the best exchange rates on your transfer. But, of course, transfer fees and transaction costs also matter.

Although banks may come to mind when you need to make a significant money transfer, many other less expensive options may offer you better deals.

Read on to learn more and how to get the best rates when transferring large amounts of money overseas.

Common reasons for sending large amounts of money overseas

Here are some reasons for sending large amounts of money out of Australia:

• Sending money back home to family;
• Running an e-commerce business such as on Shopify or eBay;
• Returning to live in the country of origin or another country and selling the family home in Australia;
• Paying suppliers or contractors overseas;
• Buying high-value property or a yacht, for example;
• Paying for education overseas;
• Paying for international exams and qualifications while staying in Australia.

How international money transfers work

Main options for transferring money overseas

International money transfers can be made in several ways. These include:

• Bank transfers
• International money orders or bank drafts
• Using money transfer companies, which are a different kind of financial institution from traditional banks.

Transaction fees for international money transfers

Whichever method you select, each company or bank will take your Australian dollars, convert them to the relevant currency of your recipient and send it to the local institution that will hand over the money to the recipient.

Along the way, there will be various fees, charges and expenses, including upfront and hidden costs for you, the sender, and the recipient. What they are and how much depends on your chosen transfer mode and service.

Your cost for sending money overseas can also vary significantly, not just from bank to bank (or platform) but also from country to country. This means that the cost of sending $1,000 to the UK may not be the same as sending that amount to India, China or the Philippines.

Sending money overseas can involve the following costs:

• Transaction fees charged by a financial institution when you are sending money to an overseas bank account;
• Receiving or processing fees often may have to be paid by your overseas recipient for processing the transfer;
• Intermediary banks charge intermediary fees. When your bank’s correspondent bank in the foreign country happens to be different from the recipient’s bank, that third party or intermediary will also charge for the service;
• Cancellation and amendment fees are payable if you wish to cancel or amend the transfer of funds overseas.

Foreign exchange rate differences for overseas remittances

Beyond bank charges, the international currency exchange rates used by various transfer companies and platforms can significantly affect your transfer cost. Here are some useful terms for foreign exchange (FX) transactions.

Buy and sell rates for foreign exchange. For example, a typical bank will charge one rate when you ask to buy, say, a US$1000, but will charge another rate if you are receiving US$1000 into your account from someone. The first is the rate at which the bank sells you US dollars. The second is the rate at which they buy your US dollars (to give you Australian dollars).

Here’s an example you will see at a bank or exchange website:

• Selling 1.00000 AUD and you get 0.74649 USD
• Buying 1.00000 AUD and you pay 0.74694 USD

The difference between foreign currency buying and selling rates is called the spread. This is also referred to as the bid-ask spread in foreign exchange transactions. The bank makes the spread when they buy and sell foreign currencies.

Mid-market exchange rate or the middle rate or mid rate in foreign currency exchange is the exchange rate exactly halfway between a currency’s buy and sell rates (or bid and ask rates).

Why does this matter? It matters because it brings down the cost of your transfer. While banks will stick to their buying and selling rates, most money transfer platforms and services will offer to give you money at mid-market rates, which is always lower than the bank selling rate. So what does this mean? It means that they are offering you foreign exchange at a much more affordable rate than the bank is.

The exchange rate margin is the difference between the mid-market exchange rate and the exchange rate banks offer to consumers like you. Unfortunately, often this is not displayed transparently for you to see. Moreover, because exchange rate margins keep fluctuating continuously in accordance with dynamics in the foreign exchange markets, they can be challenging to pin down.

You can expect to see bank exchange rate margins vary widely, from as low as 1.50% (of the transfer value) to as high as 15.00%. You can also expect the exchange rate margins of major world currencies to be lower than those for more obscure or volatile currencies.

The relationship between exchange rates and transaction fees can vary from country to country.

Exchange rates and transaction fees are related.

Typically, exchange rates are charged proportionally to transaction fees when making international wire transfers.

• UK banks tend to charge most or often their fees as exchange rate margins. As a result, they have high margins — often around 8.00% to 10.00% — and their transfer fees are very low or non-existent.
• Singaporean banks levy most of the international transfer fees in fixed and commission fees. This results in higher fees but lower exchange rate margins.
• Australian banks and US banks fall somewhere in the middle.

Choosing the right money transfer service

Now that you understand the basic cost structures let us look at how to select the right platform for sending your money overseas.

There are various ways in which you can make overseas money transfers. The most common are bank transfers, bank drafts or via a money transfer company. The latter is also referred to as money transfer specialists.

Let us first consider the traditional methods. This will help you understand why more and more people are beginning to use these non-bank money transfer specialist services and platforms.

Bank transfers

With a bank transfer, you move your money from your bank account to an overseas bank account. Such a money transfer may be called a telegraphic transfer (TT), a wire transfer or a SWIFT transfer.

Direct bank transfers can prove to be expensive for sending money overseas. According to the Australian Competition & Consumer Commission (ACCC), the four big banks are rarely the cheapest option for sending money overseas.

You will also find the exchange rate offered by big banks to be typically less competitive than your other available options. You can also expect bank transfers to take a few days, even up to five business days, for the money to realise.

International money orders or bank drafts

International money orders are also referred to as bank drafts. Simply put, they are internationally guaranteed cheques drawn on a bank, as opposed to personal or company cheques.

Before your bank issues a bank draft, you must pay for the bank draft with your credit card or debit card or ask the bank to withdraw the amount from your bank account. The bank draft works in the same way as a cheque. First, you post the bank draft to the recipient, who cash it or deposit it into their account. Then, depending on the country they are in, they can cash it in at their bank, at an ATM or at a cheque-cashing store.

Bank drafts are more secure than cheques, but they can be more expensive compared to online transfers and are much slower. Don’t confuse bank drafts with money orders or cashier’s cheques. The following features make bank drafts more useful in international money transfers.

• The exchange rate used in bank drafts is that day’s rate, while the exchange rate used for a money order or cashier’s cheque will be the rate of exchange on the date it is cashed. This can lead to problems when exchange rates fluctuate a lot.
• There are no limits to how much you can transfer using bank drafts. Money orders usually are limited to $1,000, but it can depend on where you get them.
• Bank drafts are also safer than money orders or cashiers’ cheques. Because they are difficult to verify, many scams involve fake money orders and cashier’s cheques. Anyone can easily verify a bank draft by contacting the issuing bank and referring to the details on the bank draft.

If you are opting for a bank draft, here’s what you must consider:

• Bank draft fees can vary depending on the bank or financial institution. So you want to compare fees.
• Not all banks offer all currencies. Check with your bank to find out whether they support the currency you need for your bank draft.
• You may need to consider other transfer options if your bank doesn’t support bank drafts issued in the foreign currency you require.
• Check the processing time. How long does it take to get a bank draft processed from the time you apply for one?
• Application options may be cumbersome. For example, some banks may want you to visit in person or make a written application.

Money transfer services

Money transfer services are alternatives to bank-led options when sending large sums overseas.

Depending on the money transfer service or platform, you can do it in person, over the counter, online, using mobile apps or by phone.

The money transfer process when using transfer services

First, you will need to pay the Australian dollar equivalent and the relevant fees to the transfer service of your choice. It is possible to make this payment by cash, using a bank transfer within Australia, or to use your credit card, debit card or prepaid card.

Increasingly, more people are turning to money transfer services when sending money overseas due to their advantages over traditional banks. This is mainly because they specialise in money transfers. As a result they:

• Are cheaper. They offer mid-market rates and a lower fee structure
• They are quick to send money because they operate online
• Are easier to use
• Serve niche requirements better than traditional banks

Here are some other points to consider when using money transfer services:

• Some money transfer services let you “lock in” or guarantee a foreign exchange rate for 24 hours. This applies in particular when transferring large amounts. When choosing a money transfer service, ask whether sending large amounts will get you a discount on the fees or commissions.

How to get the best exchange rate

• Compare transfer options and costs.
• Compare the exchange rates offered by banks and money transfer services.
• Money transfer services generally offer better rates than banks and are more likely to get it done faster.
• You may be able to negotiate better rates when thinking of sending large amounts overseas.
• Ensure that the service of your choice operates in the country you want to send money. Some countries do not allow access to certain services, even those as well-known as PayPal.

FAQs

Is it safe to send large amounts in one go?

• There is no doubt about the safety of international fund transfers if you use banks. It’s a process they have been doing for a long time, and any issues have been resolved.
• If you are using a new money transfer specialist service:
  • Check that the company has an Australian Financial Services Licence (AFSL);
  • Only use a service registered with AUSTRAC, the Australian Transaction Reports and Analysis Centre. It is an Australian government agency responsible for monitoring financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism;
  • Check whether you are entitled to use the Australian Financial Complaints Authority in case of a dispute;
  • Consider sending a smaller test amount if you’re unsure of safety;
  • A trial transfer would give you confidence and an idea of the actual costs and exchange rates used in the transaction.
  • You can send larger sums with the same service if it works out well.
• Online money transfer services listed on Finty are established, operated by experienced teams, licensed and regulated in multiple countries and registered with AUSTRAC. They have thousands of customers and process billions of dollars every year.

Is it legal to send large sums of money overseas?

It is legal. There is no maximum limit on how much money you can send overseas. But limitations apply to specific transfer methods, such as international money orders.

What personal or business details do I need to send money overseas?

Regardless of the destination, you cannot send money overseas anonymously. This is because there are regulations on banks and other financial institutions on overseas remittances to prevent money laundering and terrorist financing.

Before transferring overseas, you will need to provide both the sender’s and recipient’s details and banking details.

How can I fund my money transfer?

Most banks and money transfer services will let you use bank transfers, BPAY, Osko, POLi, debit cards, credit cards or charge cards to make the necessary dollar payment.

What documents will I need for an overseas money transfer?

The documents you need will depend on your chosen method and the overseas destination. In general, to transfer large amounts of money, you may be asked to provide some or all of the following:

• An approved ID or passport;
• A proven address;
• Bank account details and authentication;
• Reason for the fund transfer;
• A social security number (SSN) or tax file number (TFN);
• Online platforms will also require a working email address.

How fast can my money transfer be sent to a selected country?

That depends on the method and company you choose and which country you send money to.

Online transfers can take just a few seconds. It is possible to get the money within a few minutes, hours or on the same day. In some countries, services may take three to five working days or longer.

Generally, the same transfer speed applies regardless of the size of the amount.

What are the money collection options in the recipient’s country?

The most common is for the recipient to have the money deposited into their bank account. Some services will also offer the options of picking up the cash in person, having the money transferred to a mobile wallet or having it delivered door-to-door. Remember that options can vary from country to country.

Are there any tax considerations when sending large amounts overseas?

There are no tax considerations. Although the Australian Tax Office may audit some large transactions, you should keep a record of your fund transfers.

You may claim a tax deduction if you are gifting or donating in a foreign currency to a deductible gift recipient (DGR). Your donation must be converted to Australian dollars for this purpose.

Are there other ways to send large amounts of money overseas?

• Using cryptocurrencies. You can send funds directly to a recipient’s Bitcoin or Ethereum (or another crypto) wallet. However, this requires both you and the recipient to know how crypto wallets work. Some recipients may not want to accept crypto payments or cannot do so in their country. Both parties may also incur maker/taker fees when buying and selling cryptocurrencies on exchanges. Cryptocurrency rates are notoriously volatile and can mess up your calculations.
• Sending banknotes in the mail. We don’t recommend this option because the cash could get lost or stolen, and Australians are prohibited from sending banknotes and coins overseas using Australia Post.