How does International Money Transfer work
Remittance can be an intimidating word to the uninitiated, but essentially all it means is the act of sending money to a third party, usually located in another country with a different currency. Basically Remittance = International Money Transfer Service.
Instead of using telegraphic transfer (as in the olden days), modern day remittance proceeds via money transfer providers. Whereas before you would have to do all the work of sourcing the exchange rate and then travelling physically to a location in order to conduct your money transfer activities, money transfer providers can do it all on the spot (and sometimes all online too!).
Choosing a Money Transfer Service
Choosing a Money Transfer Service
- How much money are you going to send?
- Are you going to transfer money on a frequent basis or is this a one off?
- What is the final destination of your money?
- How soon do you need to complete the transaction?
Money transfer providers are known for different specialties, thus will offer different interest rates, fees, and min/max transfer thresholds for different markets. For example, one company might be able to provide no-fee transfers to India but have limited transfer quantities to Singapore.
In general, you are most likely to save with a provider that does not charge fees and offers market exchange rates (i.e. price matching). However, depending on your needs you also may not mind paying a little more in order to gain certain benefits, e.g. faster transfers, transfers to specific countries, no caps on maximum transfer thresholds, etc.
Best Money Transfer Providers in Singapore (2020)
| Money Transfer Provider | Best For | |
|---|
| TransferWise International Money Transfers | Multi Currency Account | Apply Now |
| Western Union International Money Transfers | Physical Locations Available | Apply Now |
| WorldFirst International Money Transfers | Price Match Guarantee | Apply Now |
| InstaRem International Money Transfers | Same Day Transfer | Apply Now |
| SingX International Money Transfers | Receiving Money (no cost) | Apply Now |
Banks vs Money Transfer Services
Some banks and DBS Remittance do not incur any fees or charges for transfers, however, they also generally offer much lower exchange rates, thus you aren’t getting that much of a better deal!
Many banks also only serve their current customers, so if you don’t already bank with that provider you will have to open a new account (and provider a lot more authentication information to do so!).
A list of common fees incurred by Banks is provided below:
- Sending Transfer Fee
- Intermediary bank fees
- Exchange Rate Mark Up
- Recipient Transfer Fee
And as a comparison, a list of common fees Incurred by Remittance Companies:
- Transfer Fee
- Additional Considerations
Additional Considerations
Additional Considerations
Hidden Fees
If a provider is advertising “fee-free transfers” then it’s likely there’s a buried hidden fee they’ve tacked on to the exchange rate. Best to compare the mid-market rate (on Google) with the rate you’re being offered.
Fake Rates
Sometimes the advertised exchange rate is not the actual exchange rate you will get. A common tactic is to advertise the mid-market exchange rate rather than the actual rate given to customers (with the hidden marked-up costs)
Do Your Research
Research is a must! Compare several money transfer providers before choosing to service your transaction. Use a comparison website and shop around for a reliable company instead of just picking at random.
Scams
Online frauds are increasing so be aware of the common scams from strangers trying to get you to send them money. It’s safest to send money to those you know personally.
Taxes and Regulations
Money transfers are regulated differently in different jurisdictions – your recipient may have to pay taxes any money they’re being sent. For example, any monetary transfers over $2,000 are automatically reported to MAS in Singapore. Other countries, like India or the US, have stricter regulations on the required declarations.
Compare different money transfer services
Comparisons are quick (especially if using a comparison site) and can help you find the best exchange rates, cheapest transfer fees, and highest rated providers.
Transfer fees do add up so if you are going to send money it’s going to be cheaper in the long run to send one large amount rather than break it up into smaller portions.
Be fully aware of transfer limits
Providers do have transfer limits so double check any fees you may incur if you are over (or under).
Consider Foreign Exchange Services
If you want to send a large sum of money, it’s best to go with a provider that specialises in that particular type of transfer. Foreign Exchange Companies are better equipped to provide more market-savvy exchange rates and fees than providers who are only used to dealing with small quantities of money.
Choose standard transmission when possible
As with express mail, don’t choose to expedite your money transfer unless it’s critical! Selecting the standard transmission can save on unnecessary costs.
How long does an international money transfer take?
This really depends on which service you choose and with what method you decide to pay. Credit or debit card transfers tend to be the fastest (within 24 hrs), but if you pay by bank transfer this takes much more time – sometimes up to five days!
How much does a transfer cost?
This varies depending on the currency and the service chosen, but there are two main charges:
The Upfront Fee
The cost you pay for the service as a percentage of your total transfer amount. This tends to be a flat fee.
Exchange Rate Margin
Most money transfer services will tweak the exchange rates in order to profit. This is a hidden mark-up using the public mid-market rate as a base. To make sure you’re not getting completely ripped off, double check the service’s exchange rate, vs the mid-market range to see what you’re being charged.
You may also pay other costs depending on how you’re paying for the transfer (e.g. credit card payments are the fastest but also the most expensive) as well as pick up options (e.g. cash pick-ups are the most expensive).
Are there limits to how much I can send?
Again, it depends on your money transfer service provider. Some providers are more catered towards bigger transfers and can have minimum transfer thresholds as high as $5,000. However, there are also many providers that can account for smaller transfers.
It is important to bear in mind that the larger the sum of money you want to send, the more checks and balances will be required, i.e. the provider may need you to provide extra verification like proof of identity (e.g. passport), or proof of address (e.g. utility bills).
Are there free international money transfers?
A lot of providers offer deals for new customers, e.g. your first transfer free, as well as promo codes for discounts on following transfers. Bear in mind that providers who offer “fee-free” transfers may also bundle in hidden fees via the exchange rate mark-up.
Why do Exchange Rates matter?
If you don’t know what the market exchange rate is for your currency, then you are unlikely to get the best deal! A lot of providers have a high mark-up on their exchange rate margins so it’s worthwhile comparing your provider’s service exchange rates to others.
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