Do you know Canadians remit $2,855 annually? Yes, about 40% of Canadian residents send money abroad every year. Most know how pricey such transfers are.
But are there some ways in which you can make international money transfers affordable? Indeed, there are.
Let us discuss them and help you boost your savings.
What Is the Process of Remittance?
You can send money in three different forms which are:
- A direct deposit into the account of the receiver
- Making a credit into the:
- Credit card
- Debit card or
- Prepaid card
To send money abroad, you will need to take the help of financial institutions and associated businesses. Some common examples are:
- Credit Unions
- Money Transfer and Cheque Cashing houses
- Currency exchanges
After finding a reliable source, you will set up the money transfer transaction. You can do this via:
- In-person visits
What Is the Cost of Sending Money Abroad?
For the uninitiated, let us understand the cost of sending money abroad.
We can divide the cost into two parts, which are:
When you reach out to any financial institution or money transfer business, you will pay a “fee.” It is the primary component that makes your overall process of remittance expensive.
In Canada, all the banks and federally regulated institutions must tell you–How much fee they will charge for sending money to a foreign country. This quoted fee will not include the charges, taxes, or any duty levied in the country where the beneficiary receives the money.
The fee charged by various fund transfer agencies and financial institutions vary. Some might charge a flat fee (usually a percentage), and some might charge variably following slab rates.
2. Exchange Rate
Your native currency is Canadian Dollars (CAD). Suppose you want to send money to the US. You exchange or convert CAD into USD as per the prevailing exchange rates.
Again, approach financial institutions or qualified businesses. They charge you extra over and above the prevailing exchange rates. It is their profit or fee for providing you with the exchange services.
Apart from the fee you pay for sending money abroad, you will also have to pay extra to get your currency exchanged. It also adds to your overall cost of international money transfers.
Let us understand this with an example.
Alex is a resident of the Greater Toronto Area and wants to send CAD 1,000 in GBP to his sister living in London. He approached a money transfer agency and got the following quote:
|Money Alex intended to send to his sister
|Less: Connected Bank Account Fee (Electronic Fund Transfer)
|Less: Fee charged by the Agency
|The amount that will get converted to GBP (CAD 1,000−2.39−6.42)
|Applicable Exchange Rate
|Alex’s sister gets
How to cut the international money transfer cost?
So, by now–you know the remittance process and the costs you will have to incur. You can cut the cost of international money transfers in the following ways:
1. Search for Lowest Fee
There is a lot of competition in the money transfer business. Several local agencies are setting up their businesses daily. Since they are New Kids on the Block, they usually charge a much lesser fee than the big and established players.
So, you can always conduct a market analysis and look for reliable and affordable money transfer businesses–that offer you better deals. If you remit often, you will get lucrative discounts and rebates.
However, while doing so, you must also exercise caution and ensure that the agency is trustworthy. Always ask for a confirmation receipt and transaction number after the bank/agency completes the transaction.
2. Track Exchange Rates
The money transfer agencies and banks will charge some over and above the prevailing exchange rates. To reduce your overall costs, always track the exchange rates.
They always follow a set pattern. Try to understand it and time your international money transfer. Choose the day when you feel the exchange rates have bottomed out.
3. Open an Account offering a High-Interest Rate
You can always opt for high-interest savings or chequing accounts and transfer money globally through them. It will help you offset your cost of international money transfers.
Try out our banking section and explore the several chequing and savings accounts. You can even watch out for extensive comparative analysis.
What Is the Most Expensive International Money Transfer?
When you send money abroad using a credit card, it comes under “Cash Advance.” It is the most expensive way of making an international money transfer. It is because:
- You do not get any interest-free period.
- You must pay interest from the date you took the cash advance until you repay it.
- On top of it, the interest rate charged will also be higher than the standard interest rates. It will increase your interest in liability manifolds.
You will also be required to pay a cash advance fee every time you transact. The banks mostly calculated it based on a fixed percentage of the cash advance availed.
Before opting for a cash advance, you can explore cheaper alternatives like a personal loan or a line of credit. You can use these financing options to send money abroad.