March 15th, 2008Sending Money Home
Every year millions of people find themselves working in a foreign country. Many are young with personal loans and other financial obligations waiting for them at home, which presents a little problem: what’s the cheapest way to send money back to our banks at home?
Living in Japan, I find myself regularily sending money back to Canada to save and pay bills. But, that said, it’s neither easy or cheap for most of us. Let’s look at some of the most common ways we can transfer our cash.
Because I send $2000 CDN back home every two months, all fees mentioned will be based on that amount.
Western Union
This is the first name many of us think about when we need to send money. Branches can be found in most cities around the world and it’s one of the fastest options, often requiring less than a day’s wait. So how economical is it?
Fee: $104.00 CDN
Speed: < 1 day
Pros:
- very low risk
- available almost anywhere in the world
Cons:
- someone must go to the branch to collect the money
- high, non-fixed-rate fees
- money can only be sent one direction
If Western Union offered to deposit cash directly into an account of our choosing, and a much lower fee, they might have a larger share of the market. Unfortunately, I can’t ask anyone to pick up my transfer and deposit the cash into my bank account. So this is not an option.
Bank Transfer
Probably the most cost effective option is the bank transfer. That said, it’s incredibly difficult when you can’t speak the local language. Many people don’t go with this option simply because they can’t effectively communicate. However, if there are no barriers in the way, this is by far the best solution.
Fees: $20 to $40 (depends on bank & country)
$5 to $20 from home bank
Speed: < 3 business days
Pros:
- no middle-men
- usually fixed-rate charge regardless of amount
- very safe
- faster than other options
Cons:
- not always an option in nations with corrupt banks or governments
- language barriers could prevent a transfer
- Money can only be sent in one direction
If you have this option available, it will likely be the most cost-effective solution for regular transfers.
International Transfer Companies
The most popular transfer company in Japan would be GoLloyds. I’ve used their services a few times and never been disappointed. With multi-lingual customer service staff, language barriers are minimal if not eliminated and the fee is acceptable. On top of this, we have the added convenience of being able to transfer money from any ATM.
Fees: ¥2000 (flat - GoLloyds)
$10 - Canadian Transfer bank
$14 - “Handling Fee” at local bank
Speed: < 3 business days
Pros:
- can send money from almost any ATM
- minimal language barrier at start
- safe
- fastest option for most foreigners
Cons:
- a little expensive for an automated service
- not all International Transfer Companies are reliable
- money can only be sent in one direction
Until I could speak directly with the bank tellers in Japanese, this was my preferred option. The ease and convenience of sending money at any ATM in the nation was almost worth the $44 in fees.
The PayPal Swap
This is a popular option for people where PayPal lets us withdraw and deposit money directly into accounts, but shouldn’t be done if you’re in a hurry. Of all the options, this was the slowest.
The way it works is quite simple. Depending on which countries you’re sending money to, you’ll need two PayPal accounts (one for each country). Your banking information will need to be set up and confirmed, and then you can email money to yourself. This option works best if you prefer to see the money at each transfer point, and if you don’t need the money at home anytime soon. That said, if you plan on sending or receiving more than $650, you’ll need a premium account upgrade.
Fees: 1% of transfer with premium account
speed: 10+ business days (5 days from foreign bank to PayPal, 5 days from PayPal to home bank)
Pros:
- can watch money at each transfer point (from bank to PayPal to bank)
- relatively safe transaction
- money can be sent to or from both accounts
- no language barrier
Cons:
- very slow transfer times
- higher-than-standard exchange rates (usually 5 cents more expensive per dollar than other transfer options)
The PayPal option works for quite a few of the foreigners that I talk to here in Japan, but the slow delivery times and less-favourable exchange rates leave much to be desired.
The final option is one that I don’t recommend unless you have absolutely no other option.
Sending Cash to a 3rd Party
When I was first looking at options to transfer money from Japan to Canada, I had some pretty serious road-blocks in my way. Language barriers, prohibitive working hours and banks that closed at 3 pm with no telephone support are just some of the issues. Suffice to say that when the first of the month had come, I was sweating bullets to get some money back home in time for the automatic withdrawals. At one point I had almost been desperate enough to send cash back to Canada to a friend via FedEx with my bank card and a PIN code.
While sending physical money through mail is not technically illegal in most nations, it is strongly frowned on. The reasons are obvious, but let’s look at the costs of this option.
Fees: ¥4329 (FedEx Letter - Priority)
Speed: < 3 business days
Pros:
- potentially quick option when sending money
- no language barrier
Cons:
- FedEx insures letters for a maximum of $100
- requires incredible trust of third party
- no security
- customs agents may not permit cash to enter country (potentially counterfeit)
- the list goes on…
I wouldn’t recommended this unless absolutely necessary. If it comes down to it, call your creditors from abroad and explain the situation. You can probably buy an extra month of time so long as you’re honest with them.
Of all these options, I’ve found the bank transfer to be the cheapest option, but it’s not nearly as convenient as the GoLloyds international transfer.
Have you had to send money between countries? I’m curious to know if you have some better options.
If you are using a bank or a service that has a flat fee to send your money, you might be better off hanging on to it and sending a larger chunk. For example, sending $4000 home every 4 months instead of $2000 every two months. Assuming a net $50 fee per transfer, you’ll get to keep $3950 this way compared to $3900. You’ll save $50 each cycle in fees, which I think is likely to be higher than any interest you might make in that time :).
Personally, I send money home with Mitsui Sumitomo. I wait until I accumulate about 50万円 (about US$5000) “extra money” and then send it on one big chunk. Sumitomo charges me 4000円 for the transfer.
As I read your post, I was wondering about the “communication factor” you’ve mentioned about the bank transfers. Is there no possibility to use electronic banking for the transfers?
@Thomas - Using that logic, I could also just make one really big transfer every year
My Canadian bank account has some really decent interest, so I can typically earn the $50 back pretty quick. I would also much rather have the money in Canada doing something rather than sitting in my 0.00001% interest Japanese bank account. The other advantage is that if the money is in another country, it’s much harder to spend it.
@Damir - Electronic banking is certainly possible, but often requires a bit of communication at first to set up the transfer between the two banks. With GoLloyds, the only communication I had was a single quick phone call in English, and everything else was electronic-based. After the initial phone call, I’ve been able to send money back to Canada without the need to talk to anybody.
This can also be done through online banking services but, again, often requires at least one phone call or visit to the bank to ensure all the banking information is correct. Japanese banks love their paperwork, and they don’t like transferring money out of accounts unless they know everything about the transactions