Financial institutions don’t always make it easy to send money internationally. As we are more and more interconnected on a global scale, there are times and moments in our lives when we need to transfer money to different countries.
There are many options out there to do this, and it's a big part of the banking business to handle these international wires.
How to traditionally send money
Before the advent of money transfer services, and then digital money transfer services, one would use a bank and a corresponding foreign bank to send the money overseas. There would be fees from the banks and they usually take the fee from a spread between the foreign exchange rate. This can become quite costly and is not a recommended method of transferring money internationally. Even if it was a similar currency, there are hefty fees for international wire transfers for both the sender and the receiver of funds.
There's also money exchange centers usually located in touristic destinations that also end up offering non-preferred rates out there that really eat into your converted funds, as the exchange rate is built against you.
Money Transfer services
A cheaper option comes from using money transfer services such as Western Union or MoneyGram, where you're able to use your bank account or simply use a location's center and send physical currencies overseas. You can send the same currency, or also have them receive it in a local denomination if it is different from the original currency. There are multiple options to send it electronically and online in a simple matter.
When it comes to pricing with these options, they vary widely but are usually a fixed amount. They work on certain tiers so sending money up to a certain amount costs a fixed price, and then a different price at a higher tiered amount. On top of that their rates are not always the best either (the foreign exchange conversion rate), and this is another way for them to be able to make money.
Yet there is something to be said about how convenient these services are, especially for the population that is unbanked or underbanked. It’s a great way for you to be able to use your bank account for someone to be able to receive physical cash on their end, with minimal paperwork and ID verification. This helps ensure a smooth flow of funds, especially in those cases where it is an emergency.
Digital banking and Fintech
Yet even with money transfer services trying to help out, the fees would still add up, especially if there were recurring payments. Sometimes the fees could add up to several hundred dollars a year, even more, when you consider the poor exchange rates. These of course aren't always noticed, because the fee per transfer appears to be low and manageable.
This gave rise to several companies trying to start to offer better alternatives to being able to send funds across the globe. One such company that started to tackle this case was Wise. It initially worked by pooling common currency exchange pairs (such as British Pounds and Polish Zloty). With these pools, they would simply be able to offer close to the actual exchange rate when sending money internationally and converting the funds.
Since it was completely digital it would only be between bank accounts online, and there are no options to be able to physically pick up money, so not always the best option for the underbanked, and required a set-up process akin to opening up a regular bank account. As Wise and similar companies grew, their fees started to rise as well. Yet they still remain one of the lowest fees out there when sending up to a certain amount of funds.
They charge on a sliding percentage scale based on the amount you want to transfer, and based on the current market rate for that foreign exchange pairing. This means that the more you send, the higher the fee. There are also additional fees associated with how you send the funds, with traditional SEPA or ACH bank transfers being the cheapest. Yet this is not always an option and it can start to get more expensive when using alternative options such as bank wires and credit/debit card fees (Wise transfers the costs to the sender in most cases).
Keep in mind that the fee is always a percentage of the amount sent, so this is something to consider when sending large amounts. It does cap at 0.35% in most cases, but that means sending 20,000 USD will cost several hundred dollars (when a wire for example at a bank is fixed regardless of the price).
When looking for the cheapest option around, there’s a new player on the market that noticed this issue both from the money transfer services and the fintech companies trying to compete with them. That’s where Onefor comes into play. It offers a way to manage your currency and transfer within and outside of the EU with fixed pricing for any amount. That is one advantage across services such as Wise. It also charges significantly less money than transfer per transfer, which beats out the money transfer services.
The best part is there are no fees for receiving funds into the account, regardless of whether they're normal bank transfers or international wires, easily adding up the savings potential when using it. For those that send multiple transfers monthly, they even offer low-cost subscription services that even reduce the per transfer fixed fees.
There's even an unlimited option starting at just under 15 euros per month that allows for all EU and overseas transfers to be completely free, offering the best and most transparent solution out there for sending multiple EU and overseas transfers per month.
Regardless, it’s always a good idea to review and consider what your international money transfer needs are, and if it becomes a regular occurrence, consider one of the cheapest options out there with OneFor.