Are you looking for ways to send money from the United States to India? Using the bank is expensive. Sure, sometimes it's the only option, but there are other more affordable ways to send money internationally.
Banks have the highest fees and the longest processing times. Using options like e-wallets, retail exchanges such as Western Union, and crypto all offer lower transaction costs.
This brief guide unpacks how to process your transaction.
In this guide
Common reasons people transfer money overseas to India
In 2019, over $83 billion in remittances was sent to India. Reasons people transferred money overseas to India include:
- Sending money home for the family.
- Purchasing a property.
- Paying business suppliers.
- Emigration or immigration fees.
- Paying for school tuition.
- Paying for a wedding.
- Sending a charitable donation.
What are online money transfer companies?
Online money transfer companies specialize in transferring money, thereby offering lower costs, faster transfer times, and transparency. Wise, Xoom, Remitly, Instarem, and WorldRemit are online money transfer companies that can help facilitate your transfer while being cheaper than banks.
Is it safe to use a money transfer company?
As long as you use one of the providers on the Finty list, you'll get a reputable and safe deal when sending money to India.
USD / INR exchange rates
When sending money from the United States to India, the recipient will want to convert the dollars to rupees on the other end of the transaction. As a result, the bank or financial services provider will charge a currency exchange fee for processing the transaction.
When you look at the exchange rate on the provider website, they quote you a "spot" rate plus a commission. The spot rate, also known as the interbank rate, is only for financial institutions. Private individuals purchasing currency through an exchange and sending it overseas need to pay a premium above the spot rate.
Also known as the "margin" rate, this figure adds a percentage onto the spot, and that rate varies between banks and retail exchanges.
For example, if you're sending money to India, and the spot rate is $1 = ₹100 (this is an example figure only and not indicative of current or past exchange rates between the pair), the bank will quote you a rate of $1 = ₹98. The 2% balance represents the financial institution's commission for processing the transaction.
What are the fees?
To send money from the United States to India, you'll need to use a third party. As with every other third-party service provider, they'll end up charging you a fee on the transaction costs.
Here's what you can expect to pay when sending money internationally using popular payment options.
What is a typical fee?
If you're using the bank to wire money, you can expect to pay around 5% of the total amount transferred in fees.
Typically, the average transaction fee from the bank runs between $25 to $65, depending on the amount. It's important to note that this fee is on top of the margin fee discussed earlier.
With e-wallets, you could pay anything from 1% to 4.5% in fees, depending on the provider, making it more affordable than using the bank.
Crypto comes with the lowest transaction cost. However, the fees vary between coins. For example, sending with Ripple (XRP) costs next to nothing (less than 0.25%), but sending with Ethereum (ETH) can cost you a fortune due to the network costs.
Can they be avoided?
You can avoid paying the high costs relating to bank wire transfers by using other exchange facilities. Typically, retail exchanges and money-sending services like Western Union and Wise offer you more affordable fees than the bank.
Using pay cards and e-wallets like PayPal, Google Pay, and Apple Pay is also more affordable than banks. For tech-savvy individuals, cryptocurrency presents a viable solution for low-cost, lightning-fast international transfers.
Minimum and maximum transfer amounts
If you have to transfer a significant amount of money to India, it's better to use the bank. Most retail exchanges place a maximum limit of between $7,000 to $10,000 on each transaction. Minimum sending limits also apply, and sending less than $1,000 using a bank wire isn't financially feasible when you consider the transaction costs.
E-wallets and pay cards typically don't have a minimum limit, and you'll save costs by using these facilities for smaller amounts.
Alternative ways to send money to India
You have several alternatives to using the bank when sending money to India. E-wallets like PayPal and Skrill are options, as are pay cards and cryptocurrency.
However, you'll need to check with the recipient to see what they prefer. Using Google or Apple Pay wallets is another alternative, as some e-wallet services like Stripe might not cater to the Indian market.
Business vs. personal considerations
If you're sending money to private persons or companies in India, you'll have to jump through the regulatory hoops. Sending cash through the bank means you're using verified channels, and the bank has all your details on record to prevent money laundering.
However, sending through retail exchanges requires both the sender and the recipient to leave a copy of their ID or passport with the exchange when sending or collecting money. They'll also require your cell phone number, and some may also need proof of address for turning over the funds to the recipient.
Businesses will need to nominate an employee to collect the funds from a retail exchange, and that person must provide their passport/ ID and cell phone number when they collect the cash.
How can I fund my money transfer?
You can send money to India through a direct debit from your bank, a bank wire transfer, debit card transaction, or credit card transaction. In some cases, you can also transfer from payment services such as Google Pay.
How fast can my money transfer be sent to India?
If you're using wire transfer for the transaction, expect to wait up to five days for the funds to clear. Using retail exchanges is faster, with transaction times taking between one to three days. Crypto and e-wallet payments are the fastest, with some taking only a few minutes to reflect in the nominated e-wallet or crypto address.
What are the money collection options?
If you're sending money to India using retail exchanges like Wise or Western Union, the recipient can collect at partner locations in India. There are thousands of sites in major cities and rural areas throughout India. Check your local listings for details. If you're sending via wire transfer, the recipient will receive the funds directly to their nominated bank account.
Are there any tax considerations?
Whether you're sending money to friends and family in the US or anywhere else, the IRS allows Americans to make some amount of tax-free contributions annually (for 2021, the limits are $15,000 for individuals and $30,000 for married couples). If you're sending more than this amount for the year, consult with your CPA about the tax implications involved. As of 2021, India does not tax its citizens for money received in India from abroad but check for any updates before making your transfer.