Can You Use International Money Transfers For Overseas Purchases?

30 October 2016
Canstar explains how international money transfers can be a smart way to avoid costly credit card fees when making overseas purchases online.

When it comes to international travel, many consumers research their funding and spending options carefully – travel money cards, travel credit cards or travel debit cards, and even good old cash. But we’re less careful when it comes to international transactions we make from the comfort of our own living room…

Online shopping is well and truly mainstream, with popular purchases including fashion, home wares, electronics and groceries. NAB’s most recent online retail sales index report estimates that Australians spent approximately $4.16 billion in the year ending September 2016 on international online retail sales (20% of total online shopping purchases). This shows a huge increase in popularity from $53 million just 3 years ago in the year ending October 2013.

What’s the best way to make those international purchases? Most of us don’t even hesitate these days to whip out the credit card – or the PayPal account login – for our online shopping, even when it’s an overseas retailer. But the truth is, it could be costing us more than we think.

Older couple's credit card cost more than expected

Can you use international money transfers for overseas purchases?

Yes. While many consumers may automatically pull out the credit card or log on to PayPal to fund an overseas transaction, there may be more cost-effective alternatives.

An international money transfer is one such cost-effective option for larger transactions – such as a car or even a house in another country.

For example, if you were serving in the Defence or Diplomatic services overseas while your family remained in another country, you might want to be able to pay the deposit on a home loan for them to save them the hassle. Such a large amount could be expensive to send without the benefit of an international money transfer that offers discounted rates on larger amounts – as long as the service you choose is highly secure and has a money-back guarantee if the money doesn’t arrive at the other end.

Military family separated

Of course, international money transfers will not be a practical way to pay for small overseas purchases due to the minimum transfer amounts and transfer fees such as these ones, and you wouldn’t use it for your shopping basket.

What does it cost to send money internationally for a purchase?

Broadly, there are two ways in which a financial institution may charge for the conversion of currency.

One is via upfront fees (e.g. a sending fee or transaction fee) and one is via the exchange rate margin (that is, the difference between the exchange rate at which the financial institution acquires the foreign currency and the exchange rate it offers to you).

These two costs, when combined, can add up. So it’s important to compare your options before just going with the international money transfer offered by your usual banking institution.

Case Study: Shopping with the credit card an “international error”

“Just before Christmas, I noticed my wife had bought a gift for a family friend from America and it got me thinking about the fees and charges on the credit card statement,” says Spencer Wilcox, Managing Director of HiFX Australia. “It also got me thinking about the exchange rate that was applied – was it competitive or not?”

“Then I did some more investigation and found that in the last eighteen months my credit card had been used fifty times in this manner! Ouch!

“In my instance I found that our card charged a 2% international transaction fee, plus it rather stealthily skimmed an additional 2% margin between the wholesale price of currency and the rate of conversion on my card. So it was costing me and extra 4% each time we used our plastic for overseas costs.”

See Canstar’s star ratings report for International Money Transfers to find out more, or compare your options on our website:

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