International money transfers can be complicated. They’re not as straightforward as local transfers that take minutes to settle. In contrast, foreign transfers take several days to settle and require significant fees. Little mistakes can also cause significant consequences. You should pay attention to some critical factors to avoid making such mistakes, including:
1. Fees
Fees are the first thing to consider for any international payment. Banks usually charge up to $50 for a single international transfer, which is high if you’re sending relatively small amounts like $100, $200, $300, etc. If you fall into this category, you’ll be better off using a licensed money exchange specialist such as Western Union or MoneyGram.
2. Exchange Rate
The transaction fee is transparent, but there might be a hidden fee in exchange rates. If you’re sending cash abroad to be converted to the recipient’s local currency, find out what exchange rate your bank offers. The rate should be very close to what other competing banks and money transfer providers offer. A difference as low as 0.5 could cost you significantly.
If possible, exchange your currency for that of the recipient before sending it. This will avoid any unnecessary exchange fees that you have no control over.
3. Ensure You Have the Correct Details
Many people experience delays in their bank transfers because they provide incorrect details. You should ensure you have the accurate details of the recipient to execute the payment with little hassles. The required details include
- The recipient’s full name (the one formally registered with the bank)
- The recipient’s account number
- The SWIFT/BIC code of the receiving bank
- The currency you want to exchange to
The SWIFT/BIC code is the most important detail. It’s what banks used to identify themselves on the Society for Worldwide Interbank Financial Telecommunications (SWIFT) system. Even if all other details are correct, providing the wrong SWIFT code means the payment won’t go through.
What Does A SWIFT Code Look Like?
It comprises 8 to 11 characters in this format; AAAABBCCXXX
- The first four characters signify the banking institution’s name.
- The next two characters identify the country the institution is located in.
- The next two characters identify the bank’s main office in the country.
- The last three characters identify the specific banking branch of the recipient.
Here’s a typical example of a SWIFT code: CHASUS33TMG.
- CHAS signifies J.P. Morgan Chase
- US identifies the United States of America
- 33 identifies New York, the U.S. state where Chase Bank has its main headquarters.
- TMG identifies a specific Chase branch in New York.
SWIFT Alternatives
SWIFT isn’t the only network that facilitates foreign transfers, but it’s the most popular. Other well-known ones include
- Single Euro Payments Area (SEPA) for Euro-denominated transactions.
- System for Transfer of Financial Messages (SPFS) for ruble transfers to Russian banks.
- Cross-Border Interbank Payment System (CIPS) for yuan-denominated transfers to Chinese banks.
These SWIFT alternatives work similarly, so you’ll still need a unique code identifying the recipient’s banking provider.
1. Transaction Limits
Some banks have foreign transfer limits for individual customers. Ensure you confirm such limits before sending a large amount of money abroad. Similarly, if you’re the intended recipient, confirm if your bank places any limit on how much you can receive in a single transaction.
2. Transfer Time
Different transfer methods have different time frames. For instance, SWIFT transfers can take up to five business days to settle, while money exchange services can handle it on the same day. Hence, if your transaction is urgent, you’re better off choosing the latter option.
Conclusion
We have explained the most important things to consider to avoid making mistakes with your foreign payments. Adhere to these tips, and you’ll likely transact with no hassles.