International Money Transfers - November 7th
Australians send more than $2 billion overseas every year, according to the World Bank. So what are the ways that we can do it?– Read more
International Money Transfers - November 7th
What does it cost t transfer money overseas? Possibly more than you realise…– Read more
An international money transfer is when you send money from your bank account in Australia to the bank account of someone you know in a different country.
International money transfers are popular for both large and small amounts. Globally, the World Bank estimates that in 2015 approximately $581.6 billion was sent in remittances (people who send money as a gift to people they know overseas). The total sent is expected to rise to $610 billion in 2016 and $636 billion in 2017.
When making a money transfer, you will usually need to know the other person’s full name, address, account number, and Branch Number or Bank Identifier Code (SWIFT BIC or IBAN).
To find out whether your Australian dollars will equate to much in the local currency of the country to which you’re transferring money, check our list of 10 currencies the Australian dollar has risen against.
The government’s Study In Australia website says Australia is the world’s third most popular destination for international students. And no wonder! We have more than 1,200 tertiary education institutions, with over 22,000 courses to choose from, and our university system ranking is ninth in the world, ahead of Japan, New Zealand, and Germany.
According to Australian Education International, there were over 507,000 international students in Australia by the end of August 2016, which represented a 12% increase on the same period for 2015.
Useful resources for students:
There are two types of overseas workers: Australians working in a different country, and people from other countries working in Australia.
Australians are getting more and more used to FIFO jobs (fly in, fly out) that require them to work in a different country to Australia. This can mean sending money back home to pay your expenses back at home while you’re away working hard.
At any given time, there are several hundred thousand working holiday maker visa holders and temporary skilled (subclass 457) visa holders working in Australia. As of January 21 2016, there were 100,150 457 visa holders in Australia; however by the end of June this number had dipped to 94,890 (Department of Immigration). Working visa holders will often send money back home, either for their family or to cover ongoing expenses.
The countries responsible for the highest numbers of 457 visa holders are a mix of both high-income countries and LMICs. As an indication, the five countries with the largest number of applications granted as of June 2016 were:
No matter where someone is from, if they are working somewhere other than home they will occasionally need to send money back home, either for their families or to pay ongoing expenses like a mortgage. This type of international money transfer is called a “remittance”.
Useful resources for overseas workers:
Remittances are also sent home from international migrants living and working in a country apart from their family. In 2014, there were 180 million international migrants living and working away from home and regularly sending small amounts of money back to the family that helped them secure a better future. When it comes to developing nations, remittances sent to low and middle income countries add up to $442 billion per year (World Bank, 2016), which helps communities grow resilient against poverty in the poorest developing countries of the world.
Unfortunately, many developing nations allow a monopoly for international money transfer providers, so that they can charge massive fees on these small amounts of money. CANSTAR recommends that small remittances should have lower fees globally.
Moving overseas, temporarily or permanently, is a popular option for many Australians. For many, though, it is short-term option and they may need to send money home to Australia in the meantime. The Australian Bureau of Statistics Social Trends data found that in 2010, 80% of those who had planned to leave Australia permanently didn’t stay away – they returned to Australia within 12 months.
Returning to either country may mean leaving behind investments and savings in the other country, necessitating a regular transfer of funds either to or from overseas.
Useful resources for returning expats:
In the year ended June 2016, Australian residents took over 9 million (9,679,000) short-term overseas trips (ABS). When family members travel, though, there is always the risk that they might run into trouble – or out of funds. A fast and efficient money transfer service can become essential, especially if the person in question is without their wallet!
As for family and friends who live overseas, the idea of organising to send a Christmas or wedding gift internationally can be quite daunting. It might be easier to send them some money so they can get something they really want.
Useful resources for those with family who are travelling:
As commerce goes global, businesses may find an increasing number of their transactions are being conducted overseas. With places like Singapore becoming hotspots for international commerce, it’s important for businesses to be able to send money overseas. It might also be worth knowing how to do for tax reasons if they’re so inclined…
Useful resources for businesses:
Written by: TJ Ryan
The exchange rate is the ratio at which the Australian dollar will buy a different currency, which determines the value of our currency and theirs by comparison. For example, the exchange rate from AUD to USD at the time of writing is around 70 cents to the dollar.
If you’re not familiar with the common abbreviation codes used to refer to different countries’ currencies, you should take a look at our list for Australia’s top 20 destinations, which include the following:
The table in this article outlines the cost of exchanging $100,000 at the highest exchange rate and at the lowest exchange rate of the international money transfer products researched in our 2016 report, as at September 2016. As you can see from the article, the exchange rate can vary significantly between providers. That’s why it’s so important to compare exchange rates.
|Currency||RBA Headline Rate||Highest Quoted Rate (Selling Rate)||Lowest Quoted Rate (Selling Rate)||Difference on a $100,000 transfer|
|NB: The RBA apply the mid-points of buring and selling rates as the published/head-line exchange rate. Margin rounded to 2 decimal points.
The exchange rates for the 19 institutions in our rating are captured over 4 weeks and then averaged over the prescribed period (15 August 2016 to 8 September 2016).
Our tip? Set aside plenty of time to make a short list of providers and check their rates over a number of days before choosing who to finally go with.
The main fees to be aware of include the following:
Overall, the global average cost to send an amount of $200 has remained around 7.6% or $15%, according to the World Bank. The highest average cost of 9.6% was found in Sub-Saharan Africa, where maximum costs can reach up to 20%. Find out more here.
The minimum, maximum and average fees we found in our latest star ratings are outlined below. The maximum fee you could pay is twice as much as the minimum! Thankfully though, there are many providers that do not charge fees for cancellations, amendments, or enquiries.
In Canstar’s 2016 International Money Transfers star ratings assessment, we found the following minimum, maximum and average fees across the 19 products assessed for the rating:
|Sending fees||Cancel fee||Amendment fee||Enquiry fee|
International Money Transfers Star Ratings 2016
Hot tip: A little bit of homework goes a long way when it comes to exchange rates and transfer fees, so you should compare your shortlist of institutions using our ratings before picking one. Every institution costs something, but you can make sure that more of your money goes where it should – to your recipient, not your institution.
There are a lot of different ways to send money internationally from Australia, as it is a growing and competitive industry. So what the pros and cons of different methods?
The vastness of the internet means there is more than one way to transfer money online:
You can get an International Money Order (IMO) from your bank or post office. It is similar to a bank cheque in that you post it overseas and it gets cashed at the other end by your recipient.
You should always ensure that the person you are transferring funds to is legitimate, especially if you don’t know them personally. It can be difficult, if not impossible, to recover funds sent overseas to a scammer. The government’s Scamwatch website has some tips on common scams to watch out for, such as scams saying you’ve come into an inheritance from an overseas estate or won a travel holiday as a prize.
Also, check out our tips and traps of currency exchange.
The Australian system for sending money between countries is pretty good, but that’s not the case in every country. When it comes to remittances for international migrants sending their pay home to families in developing nations, there are many barriers in the way.
According to the World Bank, remittances that are small in amount can have great value by reducing the level and severity of poverty in a region. Remittances can help communities grow resilient against poverty in the poorest developing countries of the world. This leads to:
We know that around $442 billion in remittances are sent to developing countries each year (World Bank, 2016) – often from workers in other developing countries! These remittances provide three times the amount of global foreign aid declared by governments, and they do so much good in local communities.
The countries whose GDP is partly made up of remittances include Nepal (32.2%), Liberia (31.2%), Tajikistan (28.8%), the Kyrgyz Republic (25.7%), and Haiti (24.7%) (WorldBank, 2016). This shows improvement in many areas, because in 2013 the percentage of GDP was much higher for many countries such as Tajikistan, where the 2013 GDP was 52% made up of remittances, compared to 28.8% in 2015.
Remittances act like insurance for poor countries. When times are hard for the family, workers send more, not less. For example, in Nepal, the percentage of poor people has been declining drastically even during a time of political and economic crisis, because of remittances sent from family members living in India. The poor in Nepal made up 42% of the population in 1995, but just 10 years later in 2005, that had lowered to 31%.
When natural disasters hit, remittances can get there before foreign aid does, such as in Somalia and Haiti. What’s more, those who send remittances don’t “forget” about the crisis their family is going through when the nightly news stops reporting on it. These remittances keep coming, a lifeline for a community that has been struck down, as we can see from Haiti being in the top 10 for remittances contributing to their GDP (see above).
Children benefit from fewer debilitating signs of poverty when their families receive remittances. Children who received remittances have been reported with higher birth weights and lower school dropout rates in Mexico, Sri Lanka, and El Salvador.
In many countries, it “costs big to send small”. And since remittances are typically small amounts – $200 per month or so – flat fees and charges can take a huge chunk out of much-needed money.
Globally, this fee amounted to 8% of the remittance in 2014. In Africa, the fee to send money between countries was well into the double digits.
Furthermore, many governments allow one international money transfer company to make an exclusive monopoly agreement with the post office, so that they are the only available option for sending money. So even if you wanted to shop around for a better exchange rate and cheaper fees, you couldn’t find one.
Remittances decreased in their rate of growth in 2015 because of the weakened economies in Europe and Russia, according to the World Bank. Other regions to show slowing growth are the Middle East and North Africa, Sub-Saharan Africa, and South Asia. Meanwhile, remittances to Latin America and the Caribbean have been increasing after economic recovery.
There are cheaper options that could make a big difference around the world. For example, the U.S. Federal Reserve Bank started a program with Mexico where money transfer companies could send money to Mexico for a fixed cost of only 67 cents per transaction.
In his TED talk in 2014, international migrant Dilip Ratha recommended that governments and Reserve Banks worldwide take the following steps to reform the remittance industry:
Here at CANSTAR, we compare institutions based on the features they offer and the cost charged to make a transfer, including fees and exchange rates. These ratings make it easy for you to make a shortlist of options for making an international money transfer by indicating which institutions provide better value.
So what do we look for?
The provider with the highest average exchange rate receives the top score in this category. We rate institutions for their exchange rates on the following currencies:
We’ve mentioned above the various costs in fees and charges for making an international money transfer. You can assume that the providers we’ve given a 5-star rating are a cheap option to send money overseas.
CANSTAR assesses the financial outcome of making an international money transfer through each provider – how much money gets to your recipient after the exchange rate and other fees and costs are charged? We assess each provider for two transaction scenarios:
CANSTAR only rates international money transfers provided by ADIs (institutions that are officially approved for banking in Australia). So you know that every institution on our list of ratings is a reputable source.
Apart from the basics, we also look at whether an institution provides:
Please note that these are a general explanation of the meaning of terms used in relation to international money transfers. Your provider may use different wording and you should read the terms and conditions of your product carefully to understand what fees and charges may apply. Refer to the product disclosure statement (PDS) from your provider for their definitions of terms.
Account number: The identification number for your account, or for the account to which you are transferring money. When making a money transfer, you will usually need to know the other person’s full name, address, account number, and Branch Number or Bank Identifier Code (SWIFT BIC or IBAN).
ADI (Authorised Deposit-Taking Institution): An institution authorised and accredited to provide banking services and receive and manage deposits in customers’ accounts.
Balance: The amount of money remaining and able to be spent in your savings or transaction account at any point in time.
Conversion fee: A fee charged to convert one currency into another before or after transferring.
Conversion rate: Also known as the exchange rate.
Currency: Money. See our list of currency codes around the world here.
Exchange rate: The ratio at which one currency buys another, which determines the value of one country’s currency by comparison to another. For example, the exchange rate from AUD to USD at the time of writing is $0.73 to the dollar. Be sure to compare exchange rates before choosing an international money transfer provider.
Foreign currency: The local currency of any country outside Australia.
GST: Goods and services tax charged on purchases made in Australia. Certain internet purchases may also be subject to GST.
Internet banking or online banking: Banking that is done via the internet on a computer or mobile device. We research and rate online banking platforms on our website.
Transfer: To send money from one account to another.
Visa: A document from the government of a country that grants permission for a person to come to that country to holiday, live, work, or study.
The following international money transfer providers were included in our star ratings comparisons at the time of writing and details are correct as at that time. Please check the current terms and conditions of transfer providers before making a choice of provider.
Compare International Money Transfers using the selector tool at the top of this page – simply select the destination you wish to send money to.