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Transferring money from USA to Australia can be a confusing process. It involves account numbers, SWIFT codes and other technical details that can intimidate newcomers. Then, there’s the issue of cost.
However, banks are no longer the only game in town. These days there is a multitude of alternatives to the status quo. From Transferwise to OFX, these alternative providers aren’t just legit – they are cheaper, more efficient, and friendlier.
Below, we won’t just teach you how to move money to Oz – we’ll also save you a bundle in the process. Let’s get started.
Don’t Use Your Bank To Move Your Money. Just Don’t
Transferring assets is an incredibly stressful chore. Under duress and not knowing any better, the average American usually sends money abroad through their bank.
Even if they are vaguely aware of alternatives, most people go with the devil they know rather than the devil they don’t know. It’s also convenient – rather than jump through hoops, they can lean on their personal banker.
So, why should you avoid moving money through your bank? In brief, they:
Charge high wire transfer fees
American financial institutions can charge upwards of $45 per wire. That’s a big chunk for one transfer, but imagine if you had to set up recurring transfers? At $45 a pop, costs can add up quickly.
Post unfair exchange rates
Often, they’ll post an FX price 2-3% off the interbank rate. The interbank rate is what bankers/brokers use to trade currency among each other. By charging a different rate to customers, they can make hundreds or THOUSANDS more than they otherwise would.
Impose low ceilings on online wire transfers
Often, they’ll only allow you to move $5,000 at a time. Let’s assume you need to move 50,000 USD to Australia. Why would they charge you unfair fees and FX rates ONCE when they could do it TEN TIMES? You don’t need to be a math major to know that this is a terrible deal.
All the convenience in the world isn’t worth losing a significant chunk of your net worth. When you go through the banks, the more you send, the more you lose.
Your Bank Versus The Interbank Rate
Let’s assume that you’re transporting 50,000 USD to Australia. Right now, the USD/AUD interbank rate stands at 1.55912. To get a 3% differential, your bank would post a rate like 1.51346.
Before moving your money, your institution would deduct their wire transfer fee. Let’s assume they charge 45 USD. That would leave 49,955 USD to be changed to AUD at 1.51346. On the other end, you would get 75,605 AUD.
To understand how much your bank is making on this transfer, let’s do a fee-less transaction at the USD/AUD interbank rate. 50,000 USD changed at 1.55912 would give you 77,956 AUD.
On its face, paying your institution more than 2,300 AUD to initiate this transfer is an outrageous proposition. But, imagine if you invested that 2,300 AUD over 30 years? According to CNBC, the ASX has averaged more than a 6.5% annual return since 1900.
If you invested 2,300 AUD and left it alone for thirty years, it would mushroom to 15,213 AUD. That’s a lot of money to leave on the table!
Learn How To Transfer Money Online ASAP
While there is a learning curve, using an online money transfer firm is worth the effort. Savings aside, though, why would you do this when it would be easier to go through your bank?
With an online money transfer provider, the mechanics of transferring money are similar. However, on balance, it’s a more relaxed and cheaper experience than dealing with your financial institution. When you sign up with firms like Transferwise, they hold your hand through the onboarding process.
At most, transfers take no longer than two business days – the vast majority resolve within 24 hours. Card transfers, while slightly pricier than wire transfers, are nearly instant. And their cost? Most online money transfer providers offer significant savings versus the banks.
How much? We’ll discuss that in detail later on.
Which Money Transfer Firms Are Best For Moving Cash To Australia?
Almost all online money transfer firms are superior to the banks. However, depending on your situation, some operators are better than others. Below, we’ll suggest the firms that are best for specific groups.
Best for beginners: Transferwise
If you’re looking for excellent rates, a slick interface, and top-notch customer service, look no further than Transferwise. This industry leader has seen dozens of competitors pop up in recent years, but without Transferwise, none of them would be nearly as successful.
Starting in 2010, Transferwise upended the money transfer status quo by offering the unthinkable: transfers at the interbank rate. To make money, they charge a nominal fee on transaction amounts. This amount varies depending on currency pairing and the amount sent. Using the example cited in this article (50,000 USD to AUD), they charge 0.46%.
How can they do this? They employ an ingenious system concocted by co-founders Kristo Käärmann and Taavet Hinrikus. Both lived in London – every month, they were upset that they were losing hundreds from transfers to/from Estonia.
To stop the bleeding, they came up with a way to circumvent these outrageous bank fees. Rather than use the banking system, they paid each other according to the interbank rate. Struck by the thought that countless others were suffering as they once were, they started Transferwise in 2010.
Kristo and Taavet based their company on the arrangement that they had with each other. Rather than move transfers through the international banking system, Transferwise makes use of a global network of bank accounts.
When you transfer 50,000 USD, it doesn’t cross the Pacific. Rather, Transferwise pays you via domestic transfer from its Australian bank account. To make up the difference, Transferwise relies on fees generated from Aussie customers.
While competitors have made up ground recently, this formula still gives Transferwise at least the second-best rate for most currency pairings. Most transactions resolve in 24 hours, and virtually all resolve within two days. Pay more for a card transfer, and funds will land in your destination account nearly instantly.
On top of this, they have an easy-to-understand interface and a responsive customer service team. Pair that with their Borderless online bank accounts, and it’s no wonder that their popularity has endured to this day.
Best for business or large transfers: OFX
Are you moving cash to Australia for business reasons? While Transferwise does offer business services, they lack the depth that players like OFX possess. Based in Sydney since 1998, this seasoned money transfer firm focuses primarily on the B2B market.
For many customers, OFX’s fees are their most attractive feature, as they don’t charge any. To make money on transfers, OFX relies on volume. At press time, their USD/AUD rate for a 50,000 USD transfer sat roughly 0.4% off interbank. Finally, most OFX transfers resolve within one business day. Businesses value reliability and speed – OFX delivers on both consistently.
To better serve their clients, they’ve also adopted a range of value-added services. These include currency hedging tools, receiving accounts for e-commerce customers, and dedicated dealers. The last feature is especially useful for those who lack FX experience, as OFX’s brokers save clients untold thousands of dollars annually.
How Do I Transfer Money From America To Australia?
Transferring money internationally isn’t scary. But, the amount people lose via bank transfers? Now, that’s scary. The problem is this – most people assume that money transfer is (mostly) a 1:1 trade. They fail to realize the banks make the majority of their cash transfer profits via exchange rate margins.
However, as we’ve just shown you, financial institutions bury 80%+ of their profits in their exchange rate margin. In 2017 alone, Banco Santander, a major Spanish bank, made 585 million EUR (634 million USD.) Thanks to the rise of online money transfer, though, regulars are beginning to get wise to this scam.
Once you learn the basics of money transfer, switch to an online money transfer provider ASAP. The cash you’ll save will make you countless thousands of dollars in the decades to come. Do this, and your future self will thank you.