A Primer on Money Transfer and Available Options
Several vendors operate in the business of transferring money around the world. Having a wide variety of options however, makes it a difficult task for some users to choose a provider that suits their needs. This article explains the various money transfer options and the pros and cons of each. By the end of this article the reader will have acquired good knowledge to choose a provider that best fits their requirements.
Money transfer, for many, is either a one off deal or a regular need. Based on this primary classification the choice of remittance providers is easily narrowed.
Regular payments
If regular payments are to be made, for instance, remittances to family members in another city/country, transfer cost becomes a top consideration for most. For such requirements, banks that have global presence may offer better transfer rates. This is especially true when both the sender and receiver hold accounts in the same bank. Banks offer a variety of money transfer options to their customers as well as non-customers. These options may be conveniently available online, on phone or at branches. Bank transfers, however, may have some drawbacks. In particular, bear in mind that
- a transfer may incur charges at both sending and receiving banks.
- most banks do not guarantee currency exchange rate for transfers.
- a bank transfer may incur a 'currency conversion fee'.
- some banks may charge a higher fee for transfers by non-account holders.
- some banks may apply a 'cash handling fee' for cash transfers.
Learn more about bank transfer systems - SWIFT BIC, CHIPS, CHAPS, BACS, IBAN, GIRO, etc.
A quick one time payment
Branch based providers like Western Union and Moneygram offer useful services if speed of money transfer is more important than its cost. For instance, when sending money to a friend or relative in need, who has no access to a bank account in a different city/country. If the sender uses cash or credit/debit card for the transfer, money is available instantly at the receiving end. The receiver will however, need to produce valid photo identification, such as a passport, to pick up the amount at a nearby branch/agent. The photo id requirement may also apply to the sender. For an additional fee the money may also be delivered to the recipient at their address. Some drawbacks to be aware of are
- laws in some countries restrict remittances to overseas destinations.
- possibility of being lured into a fraud (explained below).
- high cost of transfers.
- unavailability of a local branch at sending and/or receiving end.
Branch-based transfer providers including bank branches charge comparatively more, per transfer, than web/online service providers. The extra cost is attributed to the convenience of dealing with a representative at a branch. Online providers pass on the savings (derived from automation) to their customers in the form of reduced transfer rates.
Online money transfer
Addressing the growth in online remittances and shopping are a number of online-only money transfer providers. These online businesses, such as the pioneer Paypal, offer competitive rates that are, at times, better than those offered by banks. The levels of convenience and security are equally comparable. After registering with a provider, money is uploaded (deposited) into the new account using internet banking or a credit/debit card. Once funded, the account may be used to shop online or transfer money to others. To avoid possibilities of fraud, the registration process involves authentication of the user and their account credentials. Be aware that
- laws in some countries restrict uploads (deposits) and/or downloads (withdrawals) of money from an online account.
- unless paid by a credit/debit card, uploading money into an account may cost extra.
- some providers charge users for making withdrawals from ATMs.
- a provider may not have a customer care cell in a country.
Frauds, Scams, Phishing
Many fraudsters reportedly use Western Union to scam users of their money. The web is filled with gory details of such scams in which unsuspecting users are lured with promises of substantial financial gains. Our readers are advised to tread with caution when dealing with transfers to someone unknown to them. The adage, "if it's too good to be true, it probably is" should always be borne in mind.
Online and phone users may find themselves drawn into a variety of other frauds based around 'phishing'. In such frauds, criminals put up a highly convincing facade, such as a web page or a phone call and ask users to reveal personal information such as, password, pin or other identifying details related to their accounts. This information is then used to fraudulently withdraw money from their accounts. Career criminals spend a lot of time devising their frauds to make them appear believable. Caution is advised when dealing with emails that appear to have been sent by banks or financial institutions. Remember that bank representatives will never ask you to reveal your password or pin details. You may find helpful advice about protecting yourself at your bank or financial institution branch/web site.
Privacy and the law
International money transfers are subject to laws that protect against money laundering and terrorism. Owing to these laws, both remitter and receiver may need to show valid identification documents to send/receive money. Transfers, notably to the US, require service providers to pass private information of the sending and receiving parties to US Government agencies.
Warnings and precautions
As a general rule, when considering a transfer provider for you next transfer, keep in mind the following.
- Even if there are low/no charges you may not get the best exchange rate.
- Inward Charges may be levied by the receiving service provider.
- Laws in some countries may require the sender to produce identification.
- Maintain a detailed record of each transaction. It will prove useful if something goes amiss.
- Most providers have daily/weekly limits on transfer amounts.
- Special care is due when filling out the transfer request. A mistake may cost you dear.
- A provider's poor customer service may leave you with a big headache.