What every expat needs to know when transferring money internationally.
This turned out to be longer than I expected. To help you navigate through the information below, I broke it up into the sections listed below.
Just click on the section heading to jump ahead.
- Why you should use a forex broker instead of a bank.
- Two forex brokers that I recommend and use personally: OFX and TorFx.
- The pros and cons of each and what to consider when choose a forex broker for transferring your money to Australia.
- Two alternatives to forex brokers that are worth checking out: Transferwise and Currencyfair.
- The pros and cons of both Transferwise and Currencyfair.
- International transfer fees for the main Australian banks.
Be sure to check out my post on how to open your Australian bank account before you leave. It goes hand in hand with this post as you will of course need a bank account to transfer funds into.
All Expats Shop Around for the Best Deal
The truth is you will probably end up, just like me, with accounts at each of the four companies I mention in this post, if not a few others too.
I have transferred money with each one and will pick one over the other depending on the amount I’m transferring and how quickly I need the transfer to go through.
I will cover the pros and cons to each of them based on our experience.
Did you see the bold print there?
Yes, this is all based on our experience transferring money back and forth.
I am not a financial advisor which is why I have linked to each forex broker or exchange company below so that you check out each and make a decision as to which works best for your needs.
The main points to consider when transferring money are: exchange rate (obviously), fees, commissions and time it takes to complete the transfer.
If there is only one thing that you take away from this post, let it be this.
Do not transfer your money internationally with a bank.
Having a separate account just for transferring money may seem like a hassle but when it comes to saving you money and getting the best exchange rate, it is 100% worth it. Trust me on this. When we moved to Australia we transferred our savings over bank to bank and got majorly screwed.
What About International Bill Pay?
I can already hear you saying, “But I have international bill pay with my Australian bank.”
Don’t use it!
I know it seems so convenient but international bill pay has the worst exchange rate plus there are usually fees, high fees.
Now your bank may tell you that there are no fees but the fees are definitely there, hidden in the very poor exchange rate.
International Bank Accounts with Citibank and HSBC
“But what about my global bank account with Citibank? I can easily transfer money to my Citibank Account in the US from my Citibank Account in Australia.”
Again, it comes down to the exchange rate. Even though Citibank is an “international” bank, the exchange rate is not going to be as good as what you will get using a forex broker.
Same goes for HSBC.
Still don’t believe me? Alright, here are five reasons why you should not transfer money with a bank. Any bank, not just the ones that offer international accounts.
Five Reasons Why You Should Use a Forex Broker When Transferring Money Internationally Instead of a Bank.
- Customer Service
A forex brokerage business is built on referrals, so customer service is critical.
These companies aren’t as well advertised as big banks. As a result, they value their customers more because they know that you will be transferring money more than once and they want to get your repeat business.
When you phone or email your forex brokerage with a question, you’ll get professional help from a qualified person who specifically deals with forex-related issues.
If you contact a bank with a question about your transfer, you will most likely end up speaking to someone in a call centre who deals with all sorts of different banking queries every few minutes.
Is that the person you want to trust your money with?
- Better Exchange Rates
A forex brokerage has lower overhead costs than banks, so they don’t need to charge high fees. And, because they bulk-buy currency, they are happily to pass the discounts onto their clients, saving you money.
Also, the rates offered to you by a forex brokerage will always be better than the banks because of the competitiveness in the free market.
- No Hidden Fees
Depending on who you use, a forex brokerage is very transparent. This means that there are no hidden costs. What you see is what you get.
- Expert Knowledge
The people you talk with know the foreign exchange market, and they know it well.
It’s essentially their only job. Whereas at banks, the bank clerk does a million other things throughout the day, and they will probably frustrate you more than help you.
Foreign exchange is a forex broker’s specialty, and you can’t get better than that.
These companies also know what questions to ask. By asking the right questions, the money transfer process will run more smoothly and they offer you the right solution, the first time.
- Fast, Secure Payment
When using a forex brokerage, payment is quick and secure. Typically, you would wait ten days for your money to arrive on the other side when using a bank, but with a forex brokerage, you would wait two days.
Transferwise, although not a forex broker, does offer fast transfers for a fee.
Handy to know if you forget that your student loan is due or some other bill you have on autopay with your bank back home.
Forex Broker Recommendations: OFX vs Torfx
OFX is the most popular forex with expats living in Australia.
I have yet to meet an expat that doesn’t use OFX for almost all of their money transfers.
Here’s why you should consider them as your first choice too.
- Since you’re a SMG reader, you get free transfers for LIFE. Yay!
- There are no international transaction fees because of the large network the OFX has.
- Even though there is a minimum transfer amount, almost everyone that is transferring money is transferring more than $250.
- You can lock in your rate of exchange something I highly recommend doing if you are transferring a large sum of money.
Forex Alternatives Worth Checking Out
There are two alternatives to forex brokers that are both very clever and utilise a peer-to-peer marketplace.
Peer-to-peer is a different way of thinking about international money transfers which might put off some people that want a more traditional, tried and true system. But it shouldn’t. Both options are secure, fast and all done online.
Ok, let me first explain how they work then I’ll go into details and list the pros and cons of each as I did with the forex brokers above.
Let’s say you are moving from the US to Australia and want to transfer money into your new Australian bank account.
At the same time, I am in Australia and need to transfer money back to the US to pay my student loan bill.
Pros and Cons of Transferwise and Currencyfair
The main benefit of using Currencyfair is being able to bargain for the best exchange rate possible. Depending on how much you are transferring, this can make all the difference in the world even with the transfer fee.
If you are moving from the United States to Australia, you will have to wait until you are located in Australia to use Currencyfair. This is not the case for other countries.
Once in Australia, moving money back to the United States is no problem with Currencyfair and well worth checking out especially since they offer SMG readers one transfer for free.
Due to high fees and the fact that the exchange rate is just an estimate, I have made Transferwise the runner up. But, I feel that I should point out that for fast transfers for small amounts, Transferwise is my go to option.
There have been a few times that I have forgotten about a bill back home and Transfers has saved my butt.
Australian Bank Fees for Foreign Funds Deposits
Since I’ve brought up bank fees for international transfers a few times I thought I should include links to the major banks in Australia and their fees.
Between the two forex brokers I mentioned, OFX is my top pick. If you are transferring a large sum of money to Australia, then I would definitely ask about locking in your rate of exchange.
Currencyfair is my top recommendation because it is possible to get a better exchange rate than with a forex broker. Since they offer SMG readers the first transfer for free, there really is no reason not to check them out and see what you think. Transferwise is a good option for small, fast transfers but remember that the exchange rate is only an estimate.
If you have any suggestions or use a service, other than the ones I mentioned here, that you love or even the opposite, please mention it in the comments below.