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International wire transfers can be effective, quick and even cheap — but any mistakes you make can cost you time and money.
When Marian Schembari moved from the U.S. to Germany with her husband, she still worked as a freelance writer in the U.S. and used money transfers to send income between her U.S. and German bank accounts. But one of the transfers didn’t work out as planned.
“I accidentally put in the wrong number,” she says. “I had actually sent almost a thousand dollars.” The money had gone to the wrong bank account.
This only begins the list of mistakes that can happen when sending an international money transfer. Here are some big ones to avoid:
1. Getting account details wrong
Many international money transfers require bank account and routing numbers for both the sender and receiver. But these details aren’t always straightforward. The account and routing numbers, which together identify the bank accounts on either end of a transfer, have formats that vary by country. For instance, American banks use nine-digit routing numbers and various lengths for account numbers.
"Sometimes people transpose the account number and the [routing] number,” says James Dowd, financial advisor and managing director at North Capital Inc. in San Francisco.
In Schembari’s case, her German account code and bank code added up to about 30 characters — and only the last digit of the account code was incorrect.
2. Not converting dollars to foreign currency
When you make an international transfer, you start with dollars and you expect the right currency to arrive to your recipient’s bank account. But when the currency conversion happens matters. If you skip converting on your end, the transfer can be rejected at the other end, or the foreign bank might convert the money at a higher exchange rate or for a fee. This can put a strain on the recipient, especially if it results in delivery delays or the person receives less money than expected.
3. Looking only at upfront fees
There are two main costs when sending international money transfers. The first is the service fee providers charge for sending money. The second is what you end up paying to change dollars into the currency of the country you’re sending money to. This cost depends on the foreign exchange rate between the two currencies, say, dollars and Mexican pesos, which differs by provider.
Banks and other providers generally mark customer exchange rates up to make a profit on a transfer. For example, a bank might receive euros at a rate of $1 to 0.89 euros, meaning $1,000 would be 890 euros. When you transfer $1,000, though, your bank gives you a less favorable exchange rate of, say, $1 to 0.86 euros, meaning you’re sending only 860 euros. That’s 3.4% less, and the transfer would cost you the equivalent of $34 on top of the bank’s fee.
4. Not comparing different transfer providers
Transfer providers charge different exchange rates and fees, so shop around before sending money. Banks charge an average of about $42 to send international transfers, and the receiving bank may also charge a fee.
Banks don't make cash-to-cash transfers abroad, but providers such as Western Union and MoneyGram do and have worldwide networks. You can also send money online to some countries through nonbank providers, such as TransferWise and Xoom, for low fees and at competitive exchange rates. If you’re sending a lot of money or making recurring transfers, consider working with a foreign exchange dealer such as USForex that can help you get better exchange rates.
5. Not checking the estimated delivery time
Not all transfers go at the same speed, especially overseas. Nonbank providers sometimes offer more than one payment method and delivery option, which can impact the speed of a transfer. Paying with a debit card usually speeds up delivery, for instance, but it can be more expensive than a direct withdrawal from a bank account. To avoid the long processing times of bank-to-bank transfers, you can wire cash through Western Union and MoneyGram locations, which generally takes minutes.
In contrast, banks have limited payment and delivery options. They charge your bank account directly and send only to another account abroad, while other providers have broad networks of cash pickup locations. If you need money to get somewhere quickly, using a nonbank service is often faster.
Knowing your options in terms of providers, cost and delivery speed will help you send money the way that best suits you — as long as you get the transfer details right, too.
Although Schembari sent money to the wrong German bank account, she was lucky.
“Turns out it was a real bank account — luckily, my husband's, believe it or not,” she says.