For the first time in 120 years, the number of Australian residents who were born overseas has topped 28% (ABS, 2016). That means even more people have relatives and loved ones overseas. A popular way to send a gift is through the transfer of money – after all, it’s easier than wrapping and posting a bulky present, and it could arrive faster!
Whether it’s for a Christmas gift, a wedding you can’t attend in person, a loved one’s birthday, or just because, there are many reasons why Aussies are sending money as a gift.
Globally, the World Bank estimates that in 2016 approximately USD$575 billion was sent in remittances (money sent as a gift overseas). So what is the best way to send money overseas, as a Christmas gift or otherwise?
Why send money for Christmas?
|Easier than buying, wrapping, and posting a bulky present.|
|Could arrive faster than posting a present.|
|No guesswork – your loved ones can buy something they actually want.|
|Help your loved ones repay debt.|
We’ve reported that nearly 1 in 4 Aussies gets into a debt hangover after Christmas, and it’s probably no different for your friends and family overseas. To send money as a gift can effectively help your relatives deal with the cost of Christmas presents and feasts. Of course, you should definitely set yourself a budget so you don’t end up with a Christmas debt hangover yourself!
How to send money for Christmas
There are four common ways of making an international money transfer to send money for Christmas:
- Online money transfer: A growing competitive market. This transfer usually has a minimum amount required, e.g. $500 is a common minimum.
- Direct transfer via bank account: Straight from your bank account to theirs – the height of convenience. There is usually no minimum transfer required.
- International Money Order (IMO): Similar to a bank cheque. This is posted from your end and cashed at their end.
- PayPal: Transfer via PayPal itself or via its international money transfer company Xoom. There is usually no minimum transfer required.
We’ve explained more about these four most common ways of sending money as a gift here.
What does it cost to send money as a gift?
For all of the above methods of making an international money transfer, there are some costs involved in making the transfer.
— CANSTAR (@CANSTAR) November 8, 2016
There are two main factors that affect the cost of international transfers. One is the exchange rate that you receive and the other is the fees that you may pay.
Exchange rate on international money transfers
The exchange rate is the rate at which one currency will be exchanged for another – or in other words, how much of one currency you need to buy a certain amount of another currency.
Using USD as an example, Australians currently require $1.27 of AUD to buy $1 in USD, with an exchange rate of 0.79 USD to the Australian dollar. If the AUD were to strengthen, we would then need less money to buy $1 USD. Alternatively, if the AUD were to weaken, it would become more expensive for us to buy USD.
That variation in value between the local currency and the currency being purchased is the exchange rate. We’ve explained more about why you need to compare exchange rates here.
It doesn’t just make a difference to you – it makes a difference to how much your loved ones in another country receive. Here’s an example:
|Amount sent in AUD||Exchange rate||Amount received in USD|
|This is purely a hypothetical example, and the exchange rates used are not a guarantee of available rates.|
Fees on international money transfers
Depending on what type of money transfer service you use, you will generally be charged a fee to send money as a gift. We’ve written more about the fees you should expect here, but some common fees that may apply are:
Sending fee: This can go under many names, but it is essentially the fee that your financial institution will charge in order to send the money – either via a bank branch or online – to an overseas account.
Receiving fee: Financial institutions at the other end may also charge you for the privilege of receiving funds from overseas into your loved one’s bank account.
Cancellation fee: You may be charged cancellation fees if you need to cancel the transaction for any reason.
Amendment fee: If you type in the wrong bank details and you need to change the payment details, there may be an amendment fee. (If you’re very careful when making the transfer, it’s unlikely you would need to amend it later).
Enquiry fee: Following up with a phone call to your bank to find out whether the funds arrived safely may elicit another fee. To save on this fee, ask your loved ones if it arrived on email or social media, or even pick up the phone for a quick Christmas phone call.
In our technology-rich world, it is surprising that so many fees can be required to transfer money. But not all institutions will charge all of the fees listed above, so check the overall costs with your chosen institution before making the transfer.
So what is the best way to send money as a gift?
The exchange rate offered and the fees incurred can vary significantly between providers, so ensure that your cash Christmas gift is as generous as possible by doing some research beforehand. Thankfully, Canstar’s website makes this easy by comparing international money transfers to different destination countries for you: