International Currency and Money Transfers for Expats

Updated: Nov 9

“The benefits from a world currency would be enormous.” - Robert Mundell

Until then though, both when and after moving abroad, most expats need to send money between the US to their new home country from time to time.

Transferring money internationally the right way will save you a whole load of time, money, and hassle. What exactly the right way is depends on a variety of factors, including where in the world you are, how regularly you need to transfer, currency movements, and how much money you’re moving.

Sending money abroad doesn’t have to be difficult or expensive though. In today’s interconnected world, and with new fintech options springing up all the time, sending money internationally has never been easier.

In this article, you’ll learn about:

• Considerations when transferring money internationally as an expat

• Options for transferring money internationally as an expat

• Tax considerations when transferring money internationally



Considerations when transferring money internationally as an expat


Before deciding on the best way to transfer internationally, it benefits expats to research a several key considerations:


Cost


The first and often the most important consideration when transferring money internationally is the cost. Depending on how you send the funds, different types of fees may be applied. The most common type of fee is a transaction fee, which is sometimes a fixed price and sometimes applied as a percentage. Transaction fees may be charged by both the sending and receiving institution.

Most financial transfer firms, including banks, also charge what are called margin fees or the spread, which means that the currency exchange rate that they offer is higher than the interbank exchange rate. The interbank rate is the exchange rate that banks charge each other for the large or bulk exchange transactions that they do every day. This essentially means that they offer you a higher exchange rate compared to the nominal currency exchange rate.

Expats may also be charged ACH (automated clearing house) or wire processing fees, depending on how they are transferring.

The best way to ascertain the best rate of an international money transfer is to compare providers according to the total amount of target currency you’ll receive after all fees. This final figure is what you should use to compare different transfer providers to find the best deal.


Security


No matter which financial institution you choose to transfer with, they should be able to deliver your funds abroad securely. Sending money internationally is heavily regulated by governments around the world, so as long as your provider is recognized and regulated by an official national authority, security shouldn’t be a concern. It’s also worth checking out online reviews to get an idea of customer satisfaction levels.


Speed


Speed is another important factor, as nobody wants their funds tied up for days, or even sometimes weeks, in transit. To avoid this, always ask in advance how long the transfer will take. Depending on where you are in the world, international transfers should typically take between a few hours and up to several days at most.


Convenience


Most banks and other transfer solutions have apps now which, once you’ve added payees, can make international transfers incredibly quick and easy. The ability to trace transfers is another important consideration, for instance in the event that they haven’t arrived when expected.


Options when transferring money internationally as an expat


Some of the most common ways to transfer money internationally are as follows:

• Expats can withdraw cash using their US bank cards at foreign ATMs, or spend using their US bank card abroad. While this is an easy option for getting money quickly abroad, for ATM withdrawals, both the US bank and the foreign ATM typically charge a percentage or a fixed fee, so, it can end up being the most expensive way to transfer funds abroad, particularly for small amounts.

• Another option is a US bank to foreign bank money wire. While this avoids ATM fees, it incurs transaction and margin fees (or spread), typically up to $35 for the transaction and up to 5% processing fee, so while easy to arrange (normally in your US bank’s online service or app), it’s a relatively expensive option. International money wires normally take 3-5 working days too, so they aren’t the quickest option either.

Western Union is a popular, long-established service provider for sending money internationally. Western Union lets expats send and receive funds more or less anywhere in the world using a US bank card, receiving the funds either into a bank account, or you can collect cash, at a preferable cost compared to international bank transfers.

PayPal offers international money transfers, and is an easy and quick option, but also expensive. Paypal charges a small (max $5) transaction fee, and then between 3.5% and 5% of the balance transferred.

• When transferring a larger amount, for example if you’re buying a car or house abroad, expats should look to currency brokers. Brokers offer great currency exchange rates, and they allow you to lock in an exchange rate in advance, protecting your costs against currency fluctuations. By purchasing foreign currencies in bulk, these companies have the ability to sell at much lower rates than other services.

• Fintech online providers, such as Revolut and Wise are relatively new options, but among the best for international transfers. Not only are their rates and fees considerably lower than banks,they also send funds quickly and you can arrange and track transfers in an app. They also offer the ability to schedule regular payments.


Tax considerations when transferring money internationally


Having a bank account overseas also doesn’t in itself incur US taxes or penalties, but it can lead to having to file US reporting forms under FBAR and FATCA rules.

This reporting allows the government to know where Americans’ funds are, which in turn helps the IRS prevent international money laundering.

There are no taxes on international transfers, although note that the US taxes all American citizens’ global income, as do many other countries once you’re a resident there, so transferring money internationally can alert foreign governments about your income. Always check the rules and seek advice to ensure you’re keeping up with your filing obligations.


DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

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