Ten things I learned about international money transfers from five years of travel

As the saying goes: once an expat, always an expat. I've certainly found this to be true. Before deciding to finally make the move to New Zealand back in 2018 my partner and I had the privilege to travel the world for five years. In that time, we enjoyed living in many diverse and radically different cultures: We mastered a foreign language (Spanish), developed a fresh perspective on our own culture (we're from London) and have both grown professionally.

We feel that is only fair that we pass the lessons we've learned along the way onto other expats and adventurers. One lesson, in particular, that you don’t want to learn the hard way is about making international money transfers.

Everything you need to know about international money transfers

Choosing the best way to exchange money across international borders or often overseas can be a challenge, particularly when you're faced with a broad range of fees and service charges. There are so many different financial systems popping up online that it can be difficult to know which method is best.

One of your main considerations is likely to be 'how much will this cost?'. You'll also need to be aware of how long it will take for the money to get to the receiver, as well as how well-trusted the system you choose is.

In my own experience, I've come across a variety of options when trying to work out the best way to send money abroad.

1. Investigate the available options

The first thing I've found out is that a little research goes a long way. A quick search engine inquiry will provide you with a wealth of information on international money transfers.

Consider the amount you want to send, how quickly it needs to arrive, to whom and to where you are sending it, and let these factors guide your research. There's no point in deciding on an option that promises amazingly low service charges, for example, if it doesn't exchange the currency that you need.

2. Think beyond banks

It might be tempting to opt for traditional bank transfers simply because they’re most familiar. However, when it comes to transferring money internationally, doing it through banks can leave you more out of pocket than other systems. This is because of the higher exchange rates and higher fees. Bank transfers also tend to take longer than other services for your money to reach the recipient account.

I recommend looking into specialist money transfer services. This gives you two main options: remittance companies (also known as Money Transfer Operators), or Online Payment Services (here we'll be looking at peer-to-peer services). All of these services specialize in sending money abroad, and they will offer different service charges and exchange rates. It's important to note the differences between these services as things can become confusing otherwise!

• Remittance companies: remittance companies are, in essence, financial businesses that can transfer money across borders through their access to worldwide banking networks. Through a remittance company, you are usually able to send money to anyone anywhere, even if the recipient doesn't have their own bank account. Well-known companies  have branches across the world, as well as telephone transfer services.
  
• Peer-to-peer: peer-to-peer services are specialist money transfer services that operate online and through apps. They enable the buyer and the seller of currencies to transact directly with one other, rather than using a 'middle man' service provider such as a bank. Exchange rates vary between platforms, as do service charges.

In my experience, these specialist services cost less and tend to operate a lot faster than using your normal bank, and each has their own benefits and drawbacks. I'll be referring to these different kinds of service providers throughout the following tips.

3. Decide what's important to you

The service you choose will somewhat depend on your personal circumstances and the reasons behind transferring your money. When making a decision, some things you might consider are:

• Availability: Is the service available at your destination? Always check this first.
• Convenience: Do you have access to the necessary platform for the transfer to happen at both ends? Some services require you to have a bank account open in the destination country.
• Speed: You will be offered different transfer times, ranging from a matter of hours to a matter of weeks. I'd recommend only paying for express transfer times if you actually need it, since this will come at a higher price.
• Cost: The price of a transfer can be impacted by the amount, the transfer methods, and the speed of transfer. You need to check exchange rates and service fees.

4. Check available currencies

This may be an obvious one, but it's worth looking at the currencies that different services work with. Some of the smaller operators function in only a few countries, whereas larger remittance companies have more of a global presence.

Remittance companies tend to offer the widest range of currencies. Peer-to-peer platforms, however, match you with another using looking to exchange a particular currency. For major currencies, peer-to-peer works well, but you're more likely to be able to make an immediate exchange with a minor currency if you choose a remittance company. Shop around and see what's out there.

5. Think about your payment methods

The majority of international money transfer services operate online and through apps, which is both convenient and more efficient. For some of these apps, you'll need to set up an account and have it verified, which may take a couple of days.

If you'd rather make your transactions in person, you could look into remittance companies such as Western Union. Remittance companies often have high street branches and telephone options. These companies also offer the widest range of options for payment. With most, you can choose to send money online, through  an app, or you can do it in person to a bank account or to a service provider agent.

6. Avoid options to make lots of little payments (they add up!)

Regardless of the type of system or company you choose, it ends up being much more cost-effective to send one large amount internationally than it is to make many transfers of smaller sums. This is because transfer fees apply to pretty much every transfer service, and these little additions can add up if you're regularly transferring small amounts.

7. Only pay for what you need

You might see a service offering a great deal that lures you in, but ask yourself, do you really need it? Why pay for the reduced-cost express service, when you don't need the money to be sent immediately? Furthermore, there are hidden costs with most deals you’ll see advertised. That extra-low service charge might have an amount limit on it, so double check before you commit.

8. Peer-to-peer services offer lower fees

Peer-to-peer services are networks that, without the need for a central server, allow people to share access to currencies. This means that the 'middle man' (e.g. a bank) is cut out, thereby simplifying the whole process and saving you money. Essentially, sellers and buyers of different currencies are matched up, in order to offer a competitive exchange rate. Depending on the platform, users can either accept a provided exchange rate, or opt to bid on a more competitive rate of their choosing. The fees are often less than half of that of a bank.

9. Always compare exchange rates

Because there's a lot of peer-to-peer services available, they exchange rates that they offer vary by quite a considerable amount. You can save even more money by comparing the exchange rates offered by different Peer-to-peer platforms.

Remember to check their fees. If a particular platform is offering amazing exchange rates, they may be charging higher fees in exchange for their incredible rates. You should consider this in your comparison, and calculate what works out best overall.

10. Look out for scams

The main downside to the boom in the specialist international money transfer industry is that scams have become more and more of a risk. Always be vigilant when selecting your platform or service, and check that they are verified. Remember that:

• If a deal looks just too good to be true, it may well be.
• You shouldn't divulge any personal details or bank details until you're absolutely sure that the company is legitimate
• If you receive random calls or emails related to transfers, make sure that they’re authentic before you click any links or give out any personal information

Don’t forget, it's all about your circumstances

Finally, it's important to remember that there isn't one service that will perfectly suit everyone's needs on every occasion. Think about your priorities when transferring money--for example, is it low cost that you need, or speed of delivery? Let that inform your decision about the service you choose. The amount you're transferring will obviously make a difference as well.

Every service will undoubtedly offer some pros and some cons, and you need to weigh these up in relation to your own situation. For example, I decided to use XE Money Transfer, because, overall, the pros far outweigh the cons when we moved to NZ.

Overall, I've found that it's much more efficient and cost-effective to use specialist money transfer services when you’re living abroad than it is to stick with regular banks. You'll cut costs on service charges, and you’ll  be able to shop around for the best exchange rate.

I strongly recommend investigating your options and choosing a service that most closely matches your needs. Of course, taking advantage of special deals and service charge offers is often a smart move, but only if the deal they're offering is truly as good as it sounds.