- Specialist money transfer companies, direct bank transfers and bank drafts are the key options to send large amounts of money overseas.
- Each of these have their pros and cons, as well as fee and cost structures.
- In addition to fees and costs, you also need to compare the foreign exchange rates that different banks and services offer in order 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 benefit from knowing how international money transfers work and how to get the best exchange rates on your transfer. Transfer fees and transaction costs also matter.
Although banks may come to mind when you need to make a large money transfer, there are many other less expensive options that may offer you better deals.
Read on to learn more and how to get the best rates possible when transferring large amounts of money overseas.
Inside this guide
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 in 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.
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How international money transfers work
Main options to transfer money overseas
International money transfers can be made in a number of 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 for the recipient. What they are and how much depends on the transfer mode and service you choose.
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 $1000 to the UK may not be the same as sending that same amount to India, China or to 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 fees are charged by intermediary banks. 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 make a significant difference in your cost of transfers. Here are some useful terms when talking about foreign exchange (FX) transactions.
Buy and sell rates for foreign exchange. 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 is selling you US dollars. The second is the rate at which they are buying 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 these buying and selling rates for foreign currency is called the spread. In foreign exchange transactions this is also referred to as the bid-ask spread. Basically, the spread is what the bank is making 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.
Exchange rate margin is the difference between the mid-market exchange rate and the exchange rate that banks offer to consumers like you. Often this is not displayed transparently for you to see. Because exchange rate margins keep fluctuating continuously in accordance with dynamics in the foreign exchange markets, they can be difficult 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 the margins 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 all of 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 a bulk 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.
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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 are 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.
With a bank transfer you move your money from your bank account to an overseas bank account. Such a money transfer may be referred to as a telegraphic transfer (TT), a wire transfer or a SWIFT transfer.
Direct bank transfers can prove to be an expensive option 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. To put it simply, they are internationally guaranteed cheques, that are drawn on a bank, as opposed to personal cheques or company cheques.
Before your bank will issue 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 cheque. You post the bank draft to the recipient and they cash it in or deposit it into their account. 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 they 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.
- 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 are fluctuating a lot.
- There are no limits to how much you can transfer using bank drafts. Money orders usually are limited to $1000, but it can depend on where you get them.
- Bank drafts also tend to be safer than money orders or cashiers cheques. Because they are difficult to verify, there are many scams involving 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 for you to get a bank draft processed from the time you apply for one?
- Application options may be cumbersome. 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 you want to send large sums of money overseas.
Depending on the money transfer service or platform you use, 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 using your credit card, debit card or prepaid card.
Increasingly, more people are turning to money transfer services when they need to send money overseas due to the advantages they have 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
- Are quicker 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 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 to. Some countries do not allow access to certain services, even those as well known as PayPal.
Is it safe to send large amounts in one go?
- There is no doubt about the safety of international fund transfers if you are using 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 that is 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 as well as an idea of true costs and exchange rates used in the transaction.
- If it works out well, you can send larger sums with the same service.
- 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 limits apply with certain transfer methods such as international money orders.
What personal or business details do I need to send money overseas?
Regardless of destination, you cannot send money overseas anonymously. There are regulations on banks and other financial institutions on overseas remittances in order to prevent money laundering and terrorist financing.
You will need to provide personal details and banking details of both the sender and recipient before you can make a money transfer overseas.
How can I fund my money transfer?
Most banks and money transfer services will let you use bank transfers, BPAY, Osko, POLi, debit card, credit card or charge cards to make the necessary dollar payment.
What documents will I need for an overseas money transfer?
Exactly what documents you need will depend on the method you chose as well as 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 funds 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 as well as which country you are sending 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. Some countries and 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?
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 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 some large transactions may be audited by the Australian Tax Office, and therefore, you should keep a record of your fund transfers.
If you are gifting or donating in a foreign currency to a deductible gift recipient (DGR) you may claim a tax deduction. 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 other crypto) wallet. This, however, requires that both you and the recipient know how crypto wallets work. Some recipients may not want to accept crypto payments or lack the ability to 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 because Australians are prohibited from sending banknotes and coins overseas using Australia Post.