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All you need to know about international money transfers

Updated: Jun 21, 2019

Sending money abroad can be a daunting experience especially if you’ve never done it before. Equally, if you're a foreign worker, you might wonder why is it so expensive to send money home to your loved ones. After all, isn't it free to do a Skype call with your family wherever they are?

If you're reading this article, you probably have some questions about international money transfers you want answered. So here's what you need to know to get you confidently started with making your first transfer or find the best way to send money overseas.

Firstly, what is an international money transfer?

An international money transfer happens when you send money to another person or business abroad. You can do this through a bank or an international money transfer service.

So what about remittance? Is it the same?

Remittances are a subset of international money transfers.
Remittances are a subset of international money transfers.

Most people think that remittance is another word for international money transfer. While they are similar in some ways, there are noticeable differences so let's get into a little bit more detail.

Remittances are low value money transfers sent by foreign workers back to an individual (usually family) in their home country. However, international money transfers makes no such distinction. It simply refers to any money that moves across another country.

Since remittances involve transfers of money to another country, remittances can be considered as international money transfers. But, not all international money transfers are remittances.

Many families in developing countries depend on remittance transfers for survival. The funds they received are used to buy food for daily sustenance, pay for their child to go school and relief themselves of debts. Therefore, remittances plays an important role in reducing poverty.

How does an international money transfer work?

A typical international money transfer involves three key players:

  • the sender,

  • the recipient, and

  • the money transfer service provider.

It starts with you (the sender) initiating a money transfer request with the money transfer provider. Depending on who you choose, you can send money overseas in person or online. You need to provide the recipient’s details and pay the amount you want to transfer.

Upon payment, the money transfer service provider will transfer the funds over to the recipient. Finally, the recipient will receive the money in their bank account or in cash almost instantly or up to 5 working days.

Want to know more about payments? Read our post on why do payments sometime fail.

How to send money overseas? What is the best way?

Here are various ways you can send money overseas depending on what you're looking for.

1. Using your bank (foreign telegraphic transfer)

You can make a transfer with your bank in person but it's generally more convenient and cheaper to use its online banking service. This is because your bank will charge you extra to transfer money at one of its branches.

Most people tend to send money abroad with their banks but it might not be the best because it's very costly. Banks are the most expensive way to transfer money internationally, charging an average fee of 11% for a transfer.

It's also difficult to know how much the transfer will cost you in advance due to a lack of price transparency from banks. And often, your recipient will not receive the exact amount you sent to them. You'll have to pay extra just to guarantee the amount that your recipient will receive.

2. Using an online money transfer service

To combat the high fees charged by banks, online money transfer services use the latest technology to cut costs and pass these savings back to its customers in the form of low fees.

Making a transfer is easy - register an online account and get your account verified. Once it's completed, you can proceed to make an online transfer at your own convenience. Online money transfer services are more transparent with their fees so you can easily find out how much your transfer would cost you in advance.

3. Using a cash transfer service

If you need to pay for your transfer in cash, traditional money transfer services like Western Union and MoneyGram are the way to go. Unlike bank transfers, you or your recipient don’t need a bank account to send and receive money.

To make a cash transfer, head to one of their physical outlets and fill up a money transfer form. Once you've paid for your transfer, your recipient will be able to pick up the cash in a matter of minutes.

However, a cash transfer will cost you a lot more compared to online transfers.

How much will it cost to send money overseas?

There's no one answer to this. All banks and money transfer services charge differently. You could save hundreds of ringgit just by comparing different transfer providers.

When choosing a money transfer provider, you should compare both the transfer fees and the exchange rate.

1. The transfer fee

Banks and money transfer services will typically charge you a fixed transfer fee which will range as low as RM5 to as high as RM150. It depends on the transfer provider, how much you're sending, where you're sending to and how you're paying for the transfer.

2. The markup on the exchange rate

On top of the transfer fee, banks and money transfer services also add a markup or fee to the exchange rate they use to convert your money.

If you send RM1,000 to a friend in Singapore, you'll pay an extra 5% or RM50 more in addition to the transfer fee because of the exchange rate markup.

So it's important to know what the rates are before you make a transfer. A terrible exchange can cost you a lot especially if you're sending large amounts of money overseas.


Did you find this useful? What would you like to know more about? Let us know below! We'd love to hear from you.

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