How to transfer money overseas

Australians send more than $2 billion overseas every year, according to the World Bank. So what are the ways that we can do it?

Transferring money overseas is a multi-billion dollar industry. In fact the World Bank also estimates that remittances to low and middle income countries (LMICs) alone will reach $442 billion by the end of 2016.

The Australian figures are a little more modest, but we still transfer in excess of $2 billion overseas each year.

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When exchanging many thousands of dollars into a foreign currency, in most cases the exchange rate is going to be the biggest hit to your transfer. And we’ve certainly seen some currency volatility across the globe this year, what with economic struggles, BREXIT, Trump jitters and lacklustre business confidence.

People send money overseas for different purposes, from infrequent small amounts to larger daily amounts including:

Ways to transfer money overseas

There are several different ways you can transfer money overseas, including by phone, online, in a branch or via your mobile.

A majority of the 19 international money transfer platforms that Canstar has rated in 2016 allow you to do online transfers and in-store at a branch. Via phone and on mobile were less common, as follows:

Institution Via Phone

Phone icon

Online

Online icon

In Branch

In branch icon

Mobile

Mobile icon

ANZ Yes Yes Yes Yes
Arab Bank Australia No No Yes No
Bank of Melbourne No Yes Yes Yes
Bank of Sydney No Yes Yes Yes
BankSA No Yes Yes Yes
Bankwest No Yes Yes No
Bendigo Bank No Yes Yes Yes
Citi No Yes Yes No
Commonwealth Bank No Yes Yes Yes
Delphi Bank No No Yes No
HiFX Yes Yes No No
HSBC No Yes Yes Yes
NAB No Yes Yes Yes
OFX Yes Yes No Yes
St.George Bank No Yes Yes Yes
Suncorp Bank No Yes Yes No
TorFX Yes Yes No No
Westpac No Yes Yes Yes
World First Yes Yes No Yes
Source: www.canstar.com.au
International Money Transfers Star Rating 2016

What does it cost to transfer money overseas?

There are costs to transfer money overseas – read about the main costs here.

In addition to costs such as sending and receiving fees, there is also another significant – and generally most important – cost that can be easy to overlook: the exchange rate.

It’s important to understand that the exchange rate is the hidden cost of transferring money overseas and is often where the currency suppliers make most of their money. These costs arise from the margin that has been applied and built into the currency broker’s quoted exchange rate on top of the true exchange rate. This margin can vary considerably between banks and foreign exchange brokers, so when transferring many thousands of dollars into a foreign currency it pays to shop around.

As an example, the table below shows the average exchange rates for the 19 international money transfer platforms in our 2016 rating, captured over four weeks and then averaged. This is compared with the RBA headline rate averaged over the same period to show the difference between quoted rates and the rates eventually applied to consumer’s international money transfers.

Currency Average RBA (Headline Rate) Average Quoted Rate from Institution (Selling Rate) Difference Margin (%)
EUR 0.679 0.645 -0.0338 5.24%
GBP 0.580 0.552 -0.0273 4.95%
USD 0.762 0.728 -0.0343 4.71%
CHF 0.741 0.702 -0.0390 5.55%
HKD 5.911 5.648 -0.2629 4.65%
INR 51.008 49.139 -1.8681 3.80%
JPY 77.460 73.601 -3.8588 5.24%
NZD 1.046 1.005 -0.0408 4.06%
SGD 1.031 0.983 -0.0484 4.92%
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)
Source: www.canstar.com.au

So what does that equate to in dollars? The table below outlines the cost of exchanging $100,000 at the highest exchange rate and at the lowest exchange rate of the platforms assessed for Canstar’s 2016 ratings report, within the specified timeframe.

Currency Highest Quoted Rate (Selling Rate) Lowest Quoted Rate (Selling Rate) Difference on a $100,000 transfer
EUR 0.664 0.638 2,616 EUR
GBP 0.567 0.544 2,276 GBP
USD 0.749 0.720 2,888 USD
CHF 0.725 0.692 3,310 CHF
HKD 5.806 5.567 23,881 HKD
INR 50.026 47.996 202,943 INR
JPY 75.885 72.221 366,362 JPY
NZD 1.024 0.994 2,965 NZD
SGD 1.010 0.972 3,869 SGD
NB: 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)
Source: www.canstar.com.au

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 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.

 

 

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