Expat’s Guide to Currency Exchange and Transferring Money Overseas

What every expat needs to know when transferring money internationally.

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.

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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.

1. 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?

2. 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.

3. 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.

4. 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.

5. 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 HiFx

Top Pick: OFX (aka USforex, Canadianforex, UKforex and NZforex)

Pros: Free Transfers for LIFE for SMG Readers. I’m very happy to be able to offer you this. It took some finagling but they eventually agreed to waive fees just for us.

You can lock in your rate of exchange and also set up regular payments if you need to transfer money on a regular basis for things like staying on top of recurring bills back home.

Since they are an online based company and have a base in most countries, all transfers are considered domestic by banks. Therefore, there is no international transfer fee when you withdrawal or making a deposit using OFX.

Cons: There is a $1,000 minimum transfer limit. Update: New minimum transfer limit for OFX is now $250!

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.

  1. Since you’re a SMG reader, you get free transfers for LIFE. Yay!
  2. There are no international transaction fees because of the large network the OFX has.
  3. Even though there is a minimum transfer amount, almost everyone that is transferring money is transferring more than $250.
  4. You can lock in your rate of exchange something I highly recommend doing if you are transferring a large sum of money.

Runner Up: HiFX

Pros: Fast and free transfers for amounts over $2,000.

As with OFX, you can lock in your rate of exchange and you can set up regular payments.

Cons: HiFX charges a fee of $15 for transfers under $2,000.

Watch out for bank fees when you transfer money to Australia.

If you go with another forex brokerage than the two above, be sure to look up your bank’s international transfer fees and include then along with the forex brokerage fee.

For example, my bank is Wells Fargo back in the US and they charge me a fee of $15USD for international transfers. Then Westpac Bank in Australia charges me another fee for an international deposit of $12AUD. Both of these fees are in addition to the forex brokerage fee.

This is one of the nice things about transferring with OFX. Their international network means there are no international deposit or transfer fees from banks.

Don’t be afraid to haggle for the best exchange rate.

OFX and HiFX know that they are in competition for your business, so negotiate to get the best exchange rate possible. I know that might seem like a hassle but if you are transferring a large sum of money to Australia, it can be a difference of a few hundred dollars to thousands.

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.

What Transferwise and CurrencyFair do basically, but in different ways, is get us in touch with each other so and we exchange money with each other completely sidestepping the banks altogether.

In theory, we should get a better exchange rate and avoid those pesky international transfer fees but it doesn’t always work out that way. I’ll get more into that below.

Pros and Cons of Transferwise and CurrencyFair

Top Pick: CurrencyFair

Update: New Offer for SMG Readers, Your First Three Transfer for Free with CurrencyFair!

Pros: Hosts a peer-to-peer marketplace where users are in more control of their rate of exchange. Meaning, you can decide not to exchange money if you are not happy with the rate. This is not an option with Transferwise.

Like, Transferwise, CurrencyFair is all online and also has a mobile app.

Fast transfers, usually between 1 to 2 days with an option for faster service if you are in a hurry.

No international transfer fees with banks since transactions are considered domestic through the CurrencyFair network.

Cons: Cannot transfer money if you are located in the US but if you are in Australia and want to transfer money to the US that’s fine. This has something to do with US regulations.

Small fee depending on what currency you are transferring.

No personal service or client care. Not possible to lock in a rate of exchange.

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.

Runner Up: Transferwise

Pros: Very easy to use since it’s all online plus they have a mobile app if you need to transfer money on the go.

Fast transfers, usually between 1 to 4 days with an option for faster service if you are in a hurry.

A good option for smaller transfers.

No international transfer fees with banks since transactions are considered domestic through the Transferwise network.

Cons: High fees for money transfers. No personal service or client care.

Exchange rates are only ever estimated and you will not know for sure what you rate is until the deal matures several days later. Rates are also mid-market rates.

Not possible to lock in a rate of exchange.

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.

Westpac Foreign Funds Deposit Fee

ANZ Foreign Funds Deposit Fee

NAB Foreign Funds Deposit Fee

Commonwealth Bank Foreign Funds Deposit Fee

Conclusion

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.

Are you wondering if you owe any tax on money you transfer to Australia? I have a post that covers taxes and transferring money to Australia here.

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Lauren
Hi, I’m Lauren, and I LOVE being an expat in Sydney but am fed up with all the misinformed and useless expat guides out there, not only giving bad advice but also charging for it! So I created Sydney Moving Guide written by expats, for expats. Click here to read my story.

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