Send money abroad without using money transfer services: These are your best options

Millions of people around the world rely on money sent home from relatives working abroad.

There are many ways to send money abroad, but some common options can be expensive or difficult to access. In this article we’ll show some other ways you can financially support loved ones abroad.

Money transfers make the world go round

Money transfers are a vital part of the economy in many countries. Each year, migrant workers around the world send home more than $500bn.

Foreign Indian workers send home more money than the country earns from exporting diamonds, garments and rice combined. Overseas Filipino workers contribute almost 10% of the country’s economy through remittances. Guatemalans send home 10 times more money than the country earns from exporting bananas.

Even in an EU country like Romania, foreign workers send back more money than it earns from exports of cars or electronics.

World’s top recipients of money transfers:

1. India $77.4bn
2. Mexico $40.6bn
3. Egypt $29.6bn
4. Philippines $26.3bn
5. Pakistan $26bn
6. Bangladesh $21.7bn
7. Nigeria $17bn
8. Guatemala $11.3bn
9. Indonesia $9.4bn
10. Domin. Rep. $8.2bn

Source: The World Bank, 2020

The most common ways to send money

Foreign workers send money abroad in small sums. The typical remittance size is around $200.

Banks, post offices, money transfer operators and mobile money are the most popular ways to send money overseas.

• Banks

Banks are the most common way of sending money abroad. It’s easy to understand why people choose this method. Sending cash directly from your mobile banking app to a foreign bank account is super convenient.

But many people don’t realise that it’s also the most expensive option. It can be slow too. It might take days for the money to clear at the other end.

• Money transfer operators

Outside of the banking system, post offices and money transfer operators are the typical choices. They work in a straightforward way – you hand over cash at a post office in one country and it will be received as cash in another country in minutes.

You can also transfer money online using a credit card, debit card or bank transfer. At the other end, the person you’re sending money can pick up cash.

Money transfer operators have built an incredible global network. Almost everyone in the world lives within easy reach of a post office or Western Union counter. Better yet, it’s cheaper than using a bank and the money is available almost at once.

• Mobile money

Many countries allow you to send money to a phone number, known as mobile money.

Services such as Kenya’s M-Pesa pioneered mobile money that works through PIN-protected text messages. Recipients can withdraw cash through a network of agents and retailers for a low fee.

You can send money to a phone number through traditional money transfer operators and online services.

The true cost of money transfers

How much it costs to send money abroad can vary a lot. One of the ways that people pay more is by exchanging small sums. The more you send, the less it costs. But this is not the only reason for high costs.

• Hidden fees

The biggest reason money transfers cost a lot is that it’s difficult to compare prices. Money transfer operators often say they have a single fee or even no fee. But that is never the case. There is always a fee included in the exchange rate.

That fee can depend on several different factors. The country you’re sending to makes a difference. So do the currencies you’re exchanging. Are you sending cash? To a bank account? It all matters.

A typical $200 money transfer might look like this:

• Receiver will get: $195 (in foreign currency)
• Transfer fee: $10
• Foreign exchange fee: $5
• You pay: $210

But that foreign exchange fee is hidden. What customers see is the transfer fee and the foreign currency amount. That typically looks like this:

• I want to send: $200
• Transfer fee: $10Recipient gets: Rp14,985.23

The foreign exchange fee is deducted from the foreign currency amount. It’s hard to shop around for the best price when costs are shown like this.

• How much it costs to send money abroad

Worldwide, the average cost of sending $200 is $12.60 or 6.3%, according to the World Bank.

To send $200 in cash, the fee is usually $8 to $10 and the margin can be up to $6. Digital transfers are cheaper. On average, you’ll pay around $4 less on a transfer of $200. Under $10 for digital compared to more than $13 for cash.

• Cost of sending $200
• Bank $20.80
• Post office $17.00
• Money transfer $10.88
• Mobile operator $6.12

Source: The World Bank, 2021

It’s also cheaper to send bigger sums. The average cost for sending $500 is around $8.50. That’s around a third less than for $200.

When money transfer services are not a good option

As well as the cost, some other issues can make it difficult to use money transfer services.

• ID documents

Money transfer services can be difficult to access for migrant workers or the people they’re sending money to. Strict rules usually mean official documentation is needed.

The info needed for a wire transfer can vary but will usually include a valid ID. To send money using a money transfer operator in the UK or EU you’ll need one of these:

• Current signed passport
• Current full driving licence (UK)
• EU/EEA national ID card
• EU/EEA residency card
• Emergency passport

Without ID, it is impossible to send money through traditional money transfers. This is true even for sending money to a phone number through a money transfer operator.

This is also true for the recipient. In most countries it is impossible to collect cash from a post office or money transfer counter without an ID.

• Inconvenient

Sending and collecting cash from a post office or money transfer counter can be inconvenient.

Sending cash through a service like Western Union is quick. But making a trip to the nearest location where money transfer services are available can cost valuable time.

• Lack of control

Cash is king. But what if you want to know that your financial support is being used for a specific purpose? Or maybe you don’t want it to be mis-used.

When sending cash it is difficult to control how the money is used. Once it is collected, the recipient can do anything with the money.

Other ways to send money: Send value instead

Many of the problems with money transfers can be avoided by sending value instead of money.

The concept of sending value is simple. It can mean adding credit to a mobile phone in another country or sending an online gift card or prepaid credit card that can be used locally.

These types of money transfer alternatives are not subject to the same ID requirements as cash transfers.

You can also send value from anywhere at any time, and the recipient will get it at once. You can send from any country, in any currency.

Sending value is a much less restrictive way to financially support someone overseas. But it can also be a good way to make sure the money will only be used for a specific purpose.

Remember, you’ll still pay a cost through exchange rates if you’re changing currencies.

• Mobile top-up

You can directly top up someone else’s phone overseas. This is one of the best ways to send money to someone regularly without paying for an international money transfer. It also saves the recipient going to a counter to collect cash and makes sure they can always contact you.

• Gift cards and prepaid cards

It’s easy to send money abroad using gift cards. There are several options to choose from depending on the country. The recipient will get an email at once and can start spending right away.

This can be extremely flexible. For example, Amazon Pay can be used in India to pay for utility bills, cable TV, insurance and even municipal taxes. By sending an Amazon Pay gift card, recipients can use the money at once.

If you send a Visa gift card it can be used even more widely.

You can also send money to email with prepaid credit cards, which offer the benefits of a credit card without the hassle. You add value in advance and use it just like a regular credit or debit card. Compare the different options available here.

How to save on money transfers

When you’re changing one currency for another, there’s always a cost. Here are some tips to help you save:

• Send bigger amounts – It’s cheaper to send $500 than $200.
• Find the fee – Don’t be fooled when a provider says it doesn’t charge a fee.
• Check rates – Use a foreign exchange calculator such as Oanda to see standard rates.
• Send value – Save time and hassle by sending value instead of money.