Four questions to ask before sending money overseas

Whether it's paying school or university fees, preparing for an international holiday or even purchasing a property in another country, Australians rely on being able to send and receive money overseas.

In the past 12 months alone one in seven Australians transferred cash abroad, a recent survey by comparison website Finder found, with 60% of respondents who made a transfer doing so to send money to friends or family.

"This is not surprising given how diverse Australia is as a country and that so much of the population has friends and relatives overseas. In many cases these countries aren't as well off as Australia, so there's a real incentive for people to help friends or family out," says Finder travel expert, Angus Kidman.

It's not only individuals sending money abroad either. Tristan Dakin, the ANZ country manager at fintech and money transfer platform Wise, says it's also a service used by plenty of Australian businesses.

"A lot of businesses have international needs whether it's paying employees based abroad, international shipping costs or needing to pay an overseas supplier in their local currency."

As anyone who has made an overseas transfer will appreciate though, it's not always the simplest process - especially getting to grips with the costs involved. So here are a few questions worth ask yourself before making a transfer.

1. Which overseas money transfer provider will suit my needs?

The good news is that there's no shortage of options out there for Australians wanting to send money abroad. As Kidman explains, providers can be roughly split into two groups: banks and specialists.

"The first is using your existing bank or the mainstream banking system which is the option a lot of people think of, particularly if it's a bank with a large international presence. Lots of people will think about using their bank because they're familiar with it and it's convenient.

"The other option is specialist money transfer providers whose whole business is doing money transfers. You can divide this group up between those who have a significant physical presence in a lot of markets, like Western Union who can do money transfers online and in-store, and then the online providers who don't have that physical presence."

According to Finder's recent survey, 30% of Australians currently rely on banks to make their international transfers, followed by Western Union (22%) and Wise (19%).

Which option is the right fit though? Ultimately that will depend on your specific needs, but Kidman says that if you're looking to keep your costs down (which we'll explore below), an online lender could be the option for you, whereas using your existing bank might be the easiest option.

"There's a stark distinction between the specialist providers and the banks in terms of the fees. The fees for bank providers are almost always higher and they're always charging more of a margin because there's a convenience factor there. So the big decision comes between choosing whether to use a bank, or a dedicated money transfer service."

Kidman also notes that while a bank or online-only service may fit the bill in many situations, a provider with an on-the-ground presence might be the only option for those wanting to send money to relatives in a country where receiving money online is either difficult or not an option.

2. How quickly do I need to send the money?

Another factor that may prove important when comparing different providers is how long it will take for the money to reach its destination.

"The transfer process varies depending on the currency routes you're transferring between. Sending money overseas with some providers can take anywhere from a few hours to a few days, even a full business week," says Dakin.

"At Wise, a key part of our mission is to make transfers instant, which we define as taking 20 seconds end to end. As of this year, 51% of all our transfers are instant, 71% take less than one hour and 90% take less than 24 hours."

Of course, transfer time won't always be the highest priority, so Kidman encourages people to ensure that they don't end up paying a premium to expediate the process if they don't need to.

"If you want a really fast transfer you will often pay a little bit more for it, so if it's not urgent, don't pay for the urgent option."

3. How much will it cost to send money overseas?

Depending on the provider there can be two common types of fees involved with sending money internationally: transfer fees and exchange rate markups.

Transfer fees are relatively straightforward as they are generally charged as either a percentage of the total transfer amount or a flat fee. On the other hand, exchange rate markups are added on to the actual exchange rate being offered which, Dakin says, can make them harder to spot.

"A lot of providers claim to be offering a 'fee-free' transaction, but the way they earn money on the transfer is by marking up the exchange rate. They use the mid-market exchange rate as the base, then add a mark-up but won't explicitly call out that they've added a mark-up, therefore it's hidden to most consumers."

So how much can the fees and exchange rates offered by different providers impact the amount received? The following table shows the five best value options available in the Finder database for a transfer of $5000 to the United Kingdom, and the gap between them.

"If you're dealing with larger amounts of money or if you're doing it regularly like sending money back to family every month or every quarter, those differences are really going to add up," says Kidman.

"So that's when it's absolutely worth putting in the time rather than just going for what seems like the fast or convenient option."

4. Am I being scammed?

Australians lost $569 million to scams during 2022 according to the ACCC's Scamwatch. Unfortunately, Kidman says, the reality is that the international money transfer space is a very tempting area for scammers to operate in because they can take advantage of people trying to save money.

In order to help people avoid scams as best they can, Kidman and Dakin have both shared their own tips for Australians sending money abroad:

• Ignore unsolicited approaches: "Never respond to an email or text message promoting a service," says Kidman. "Go and find them yourself and if it's a brand you haven't heard of, Google them, look up any reviews and search their name and 'scams'. Hopefully being a little cynical can help people avoid falling into a trap."
• Don't share anything personal: "Never share personal information like bank account details, credit card numbers, addresses or even your date of birth with someone online that you've never actually met and verified yourself," Dakin says.
• Be skeptical of unrealistic rates: "If someone's quoting an amazing rate and you've never heard of them and you can't find any reviews, I would be very, very cautious because it could easily be either an unreliable company or an outright scam," says Kidman.
• Scams can happen anywhere: "It's becoming increasingly common for scammers to think more creatively about how to scam you; a recent one being the scammer posing as your child or parent asking for money via a text message," says Dakin. "If you think something sounds off, there's no harm in double checking with the person the scammer is supposedly meant to be."

For further tips take a look at the Scamwatch guide on protecting yourself from scams, or check out this piece on foreign currency for more information on exchanging foreign cash and other travel money options.

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