What strategies can I use to minimize international money transfer fees?

Question

I would like my younger brother to start studying in a school here, and this requires frequent international money transfers:

1. The primary source (sponsor) would be family funds that would be wired from India/China/UAE (home) to my bank account in the US every month or two
2. Every now and then, depending on my savings, I would send some money home

I am member of various Credit Unions that all offer free incoming international money transfers.

However, the CUs offer no SWIFT codes and my family refuses to risk the money transfer. Since I have no idea how this would actually work out, I do not "force" them to put in my CU's ABA number in the forms.

My guess is that the international money transfer to a CU would have to go through a domestic US bank that would tack on their fee anyways before transferring the money to the CU? (This part is a vague guess in my part and none of the CUs mention which bank this would be, giving me the impression that the international/sending bank would make their own choice?)

Instead I use bank accounts, and the transfers are faster than domestic ACH transfers: at-most a week, but typically a day! However, the cumulative fees amount to around 2% - 3% of the transferred amounts, and that's a significant amount of money in fees over a year.

Is there a way I could minimize these money transfer fees?

Answer 1

There are several ways to minimize the international wire transfer fees:

1. Transfer less frequently and larger amounts. The fees are usually flat, so transferring larger amounts lowers the fee percentage. 3% is a lot. In big banks, receiving is usually ~$15. If you transfer $1000 at a time, its 1.5%, if you transfer $10000 - it's much less, accordingly.

2. If you have the time - have them send you checks (in US dollars) instead of wire transferring. It will be on hold for some time (up to a couple of weeks maybe), but will be totally free for you.

3. I know that many banks have either free send and/or receive. I know that ETrade provides this service for free. My credit union provides if for free based on the relationship level, I have a mortgage with them now, so I don't pay any fees at all, including for wire transfer.

4. Consider other options, like Western Union. Those may cost more for the sender (not necessarily though), but will be free for the receiver. You can get the money in cash, or checks, which you can just deposit on your regular bank account. For smaller amounts, it should be much cheaper than wire transfer, for example - sending $500 to India costs $10, while wire transfer is $30.

Answer 2

The other option apart from the above which I feel is quite good is "Travel Card" [also called Forex Card] issued in USD. These cards are like prepaid debit cards. They are available from almost quite a few Indian Banks like HDFC / ICICI / UTI. The limit for students is around 100 K USD per year. http://www.hdfcbank.com/personal/cards/prepaid_cards/forexplus_card/pre_forex_elg.htm

The card can be reloaded by any amount [i think the minimum is USD 100] by visiting the Branch or certain Forex agents. There loading fee is INR 75. The Fx is typical Card Rate prevailing on the day.

In US this card can be used as a credit card for almost everything [I have used this without any hassel]. Avoid using the card for blocking anything [at Hotel for room booking, or initial block at car rentals]. Although its mentioned that there is a withdrawl fees, i was never charged anything for withdrawls.

The card comes with an internet based login to monitor account balance and transactions.

Any unused funds can be withdrawn in India. The payment will be make in INR.

Answer 3

I have recently started using Transferwise to transfer money between the U.K. and The Netherlands.

Transferwise has lower fees than other companies. They use a pseudo-peer-to-peer money transfer system. When person A transfers £ to €, and person B transfers € to £, they effectively cancel these two agains teach other, which significantly lowers exchange fees for both A and B.

I am not affiliated with Transferwise other than as a customer.

Answer 4

If you're really price-sensitive, consider carrying cash in your wallet whenever your brother (or you) comes home to your own country. Besides saving money, this should teach your younger brother to plan well and manage his living costs or otherwise he'll starve.

Let's say that a month's living cost is $1500 which includes housing, food, transportation, and the occasional splurging[1].

If your brother's school is in a per-semester basis, chances are he'll visit your home country at about twice a year. That will be $1500 * 6 months = $9000. You can still carry that amount of money in your wallet (that's 90 sheets in $100 bills, which should fit in larger wallets) provided that you're careful.

If you or your brother don't go home regularly at least once a year, the 3% transfer fee isn't that big. Let's say that the total amount that you transfer is $18K (for a year's living cost, $1500 * 12 months), the fee for that will be $540 ($18000 * 0.03), which I'll bet is far less than a return airfare from the US to India/China/UAE.

[1] I'm living on my own in Singapore right now, and my monthly expenses rarely exceeds S$1500/month, so I'm assuming that in the states that would be USD 1500. You can get a projection for that number yourself.

Answer 5

There is a startup targeted specifically to serve you for the situation you describe: - http://peertransfer.com

There are other methods. CurrencyFair is one service that might help: - http://currencyfair.com

And, there is bitcoin. Because it is new yet, there aren't very liquid markets where bitcoins are exchanged for Rupees or Yuan at decent rates at the present. Once you receive bitcoins transferred to you however, those funds are easily transferred to your B Of A account (using Dwolla to send via ACH to your bank). - https://en.bitcoin.it/wiki/Buying_bitcoins