The volume of international money transfers exceeds $574 billion a year and this number has been growing steadily.
However, despite the wide range of money transfer options, not all of those are good for large transactions.
The issue is the rates, which can make this kind of operation very costly.
Bank transfers are the option the majority of people default to for big transfers. However, the reality is that they are the least beneficial one.
Each global bank transfer might lose you over 4% of the money. This doesn’t seem like that big an issue when you are sending $100 to your friend. But when sending $100,000 to a business partner, that’s a very significant loss.
Therefore, an alternative solution is in order, and that’s exactly what money transfer companies are for.
Understanding Bank Money Transfers: Why Are They Expensive?
Banks are the trusted institutions that the majority of people turn to in order to be sure that their money is secure.
These institutions are extremely complex, though. Therefore, they require a lot of staff and regulations to operate. That’s the main reason why transactions that go through banks are expensive.
Simply put, these organizations cannot afford not to charge high fees because they have to support themselves. Moreover, the regulatory system they work under also consists of organizations that need to be paid.
The bottom line is that the customer coming to make a transfer through a bank is the one paying for all those needs through fees. And bear in mind that not all of those fees you can see.
International bank transfers are the most expensive because there are actually two banks
In essence, this kind of transfer is an exchange of obligations. This makes it even more complex and therefore costly for the client.
Bank Transfers Vs. Money Transfer Companies
Specialized money transfer companies offer an alternative to traditional bank transfers
The best money transfer companies are specifically designed for high-volume overseas transfers. And they are 100% open about all the fees that you will have to pay during the transaction.
The fact that those fees are low by default definitely makes this the best option for large transactions.
Unfortunately, such transparency is extremely rare when dealing with banks, which are renowned for having hidden fees in their transactions.
In the majority of cases, you won’t even know they are there, because they are but a minute mention in the fine print. They might also be labeled as ‘other fees’ and not explained at all.
Another advantage of using money transfer companies for transferring large sums of money is that you get to benefit from the mid-market currency exchange rate.
Exchanging the currency is one of the main reasons for losing money during international transfers, and banks always offer bad rates. The only exception is when you have a premium account and can work out a deal directly with the bank.
The best money transfer companies, on the other hand, operate using the lowest possible rate by default. This allows them to cut the cost of the transaction further.
You also get a chance to score a very good deal if you keep an eye on the exchange rates and time your transfer right.
Another reason why money transfer companies can make their services so much cheaper than banks is that they have lower costs by default.
Unlike a bank, this type of business has few employees, smaller office expenses, and less overhead regulation, which reduces fees overall.
And you shouldn’t also forget about additional perks that these services offer.
For example, you can get assigned a personalized account manager, get some good FX hedging options, get customer support 24/7, and make all your transactions using simple mobile apps.
But most importantly, the transfers that go through these services are fast, which can be essential for business.
What’s the Best Way to Transfer Money Abroad?
If you need to transfer a lot of money to some other country, a money transfer company seems like the best choice.
Bank transfers are more expensive and complicated by default. Therefore, unless you have some kind of special deal as a premium client with the bank, go for money transfer services. But be sure to pick the most trustworthy one.