Do you work overseas but are trying to pay a down payment on a house in a different country? Or perhaps you wish to send money to family, but do not know which institution to use to transfer money to Nigeria, or some other country?
There are an increasing number of options available to individuals looking to send their money overseas. From banks to currency exchange brokers to online remit services. The difficulty now lies in figuring out which service provider to choose.
Here are 5 frequently asked questions about money transfer services to help you make your decision.
Q: Are money transfer services the same as banking institutions?
Some are, some are not. For instance, under US regulations, PayPal does not fit the description of a bank. Among other things, PayPal does not enact fractional reserve banking. Many banks provide the same services as fund transfer service providers. But the composition of a bank versus a fund transfer service provider is often different. The rules that govern each institution type differ as well. Money transfer providers that are not banks are also known as fund transfer service providers, or remit services. PayPal included.
Q: Is sending money via a fund transfer service provider safe?
As with most other business dealings, online remit services are safe if you choose the right service. Because money transfer services exist largely online, it is an easier place for fraudsters to try their hand at chump change. And transfer services without the proper protections become easy targets for fraud or scam schemes. However, if you are prepared to do your due diligence and choose a highly rated service, you are in safe hands.
Most online remit services use SSL to protect your personal information and your transactions. They often also encrypt communications to banks. Where some services lack is in two-factor authentication. Or in notifying you when there are changes in your password. Which can lead to a user not being alerted when suspicious activities occur. The best way to figure out if your remit service has the security protection you are looking for is to call and ask.
Q: Which is cheaper, a bank money transfer? Or an online money transfer, using a fund transfer service provider?
Banks often charge the highest money transfer fees. Which is what led to entrepreneurial minds devising online remit services as a new way to charge less for the same service. You will likely find that a money transfer firm will quote a transaction fee that is noticeably less than what your bank has listed. However, take into account that there may be other hidden costs at play. For example, an institution may quote a low transfer fee, but then exchange your money below the current exchange rate. Or quote a higher currency exchange rate. Consider all possible fees before deciding on a money transfer firm.
Q: What do I need to have in order to set up an account with an online money transfer service provider?
Most services require that you provide the following:
- Name
- Phone number
- Place of address + proof of address
- ID to verify name
This is the minimum needed to create an account, and many institutions require more information. Few require less. To withdraw money, you will need to also provide your bank account information.
Q: What limitations are there with online remit services?
Some remit services do act as a checking account and can handle taking care of various monthly payments. But online remit services will likely not have the same range of services that a bank provides. Banks approve loans, pay interest, and can help you set up various savings and checking accounts. Which money transfer firms do not provide.
As with all matters that include money, one should use research and discernment to make a well informed choice.