With the rapid and continued evolution of technology over the last several decades, transferring money has never been as accessible and efficient as it is today. It is now possible to send money within the United States (and in several other developed countries) almost instantly and for free, and sending money internationally is a lot more affordable than in the past. Conducting a money transfer is something that most consumers in the United States do at least a few times each year, whether it is work-related, to pay for certain goods, or to send funds to relatives. In fact, the World Bank has estimated that remittances to low and middle-income countries were $589 billion in 2021 alone.
In this article, we share some tips on how to save money on money transfers.
1. Plan Ahead
A lot of financial institutions charge consumers a flat fee for sending wire transfers, one of the most popular methods for money transfers. As a result, a good way to reduce the cost of money transfers is to be proactive about how much money you’ll need to transfer in order to reduce the number of transfers you end up making. For example, if you will need to send $1,500 over the course of the year, but send 3 wire transfers of $500, you will get charged $25 for each instance. Instead, if you just sent one wire transfer for $1,500 you would be charged $25 once and would save a total of $50 in wire transfer fees. By planning ahead you can reduce the number of money transfer transactions and in the process save money.
2. Take Advantage of Free Money Transfer Apps
As indicated earlier, with the development of technology there are now several options available for consumers in the United States to send money to others, at times with no cost. The list also seems to be growing every day. These are some of the options:
- Venmo – anyone with a bank account can sign up for the Venmo application. It is completely free to send money to someone with Venmo and funds get transferred instantly. However, the recipient must have a Venmo account and won’t be able to withdraw the funds immediately as it usually takes 1-3 business days. Venmo is also not available internationally.
- PayPal – this is a very popular option for making money transfers and is also free of charge when the transfer is a domestic personal transaction using a bank account. While consumers can send money internationally using PayPal, it comes at a cost of 5% of the total transaction value, which by any measure is on the expensive end of the spectrum.
- Zelle – Zelle is a great option for anyone looking to send transfers within the United States. All consumers need is a bank account to use Zelle. While most large banks and financial institutions now partner with Zelle, adoption is still far from 100%, so it’s a good idea to first check the list of banks that use Zelle before settling on a method for the money transfer.
- Apple Pay – this is a great option for consumers that are iPhone, iPad, or Apple Watch users. However, sending money using Apple Pay is limited to consumers within the Apple ecosystem. In addition, similar to Venmo the funds transferred with Apple Pay are not immediately available and recipients will have to pay a fee if they want to expedite the process of getting access to their funds.
3. Take Advantage of Bank Accounts with Free Cashier Services
Certain merchants and businesses will request money orders or cashier’s checks as the form of payment for their products and services. While neither of these is prohibitively expensive on an individual basis with money orders typically costing between $3 and $5 while cashier’s checks generally costing between $5 and $15, over time they can add up. Moreover, most banks and financial institutions limit the amount you can send my money order to $1,000, and so for example paying $5 to send a $200 money order multiple times a year just does not make financial sense. There are many bank account options available in the United States today that offer unlimited money orders and cashier’s checks. For consumers that send several of these per year, the savings can be significant.
It’s important to not approach money transfers as a one-time activity as the reality is that sending and receiving money is a recurring activity for most consumers. As the world becomes more digital the preferred method for person-to-person payments is through one of the many digital applications. Understanding your options to minimize the cost of these transfers and planning can increase your chances of saving money.