Last weekend, my wife and I shopped around for a car for her here in Cape Town, South Africa.
Before we left the U.S., we sold her beloved Mini Cooper S, “Felicity.” She kept the money in a U.S. bank account, planning to use it to finance a car here.
But Minis in her preferred configuration are hard to find and sell fast. We needed to be ready to pounce when we find one.
That raised a question: How are we going to get her “Mini money” from the U.S. to South Africa in a hurry?
Many expats face the same question. Fortunately, there are easy solutions… although they vary depending on your U.S. bank and the country to which you're sending money.
First, don’t try to get your U.S. bank to wire money to you. The fees are absurd, the exchange rates are terrible, and they'll often insist that they'll only do it if you come to the bank in person to fill out the forms.
But depending on your bank, there is an easier way. Use a U.S. credit card, and then pay the charge immediately from the money you set aside for your purchase.
For example, I bank with USAA, which serves an international clientele (the U.S. military). Last year I bought a used car in Cape Town using a USAA credit card. I called the bank to let them know I was going to make the transaction. It only took a few seconds after the dealership swiped my card for the payment to come through.
USAA doesn't charge for international credit card transactions. A number of other U.S. banks offer fee-free international transactions, including Bank of America, Capital One, and American Express. Unlike USAA, however, this doesn’t apply to all their credit cards, just some of them, so make sure you have the right one.
A second approach is a money transfers service. An industry has sprung up in the last couple of decades, as migrants have spread across the world. Healthy competition means transfer fees and exchange rates are highly advantageous—much better than a bank.
I've used XE.com, Xoom, and Remitly. Of the three, I’ve found Remitly to be the most efficient and lowest cost. Transactions cost $1.99. You can either have money sent in the next 15 to 20 minutes, or in three to five business days with a slightly better exchange rate.
There are limits to how much you can send in a specific time period, however. Qualifying for higher sending limits means providing additional information about yourself, the origins of your funds, and other matters related to international money laundering rules.
For example, Remitly limits Tier One customers to $3,000 in 24 hours. Tier Two gets $6,000, and Tier Three gets $10,000. So, if you plan a large purchase like a car, you’ll need to make several transfers. There are also 30-day and 180-day transfer limits, so keep in mind that if you transfer a sizable chunk in a short period, it'll limit how much you can send later.
Then there are money management solutions like Wise. Wise lets you set up an account in your home currency, like the U.S. dollar, and to create secondary accounts in other currencies. You can transfer money from your dollar account to these other accounts, and then use the Wise debit card to make your purchase.
I don’t personally use Wise because it requires a wire transfer from your bank to a Wise account before the money will be available. By contrast, Remitly debits money directly from your U.S. bank account, cutting a step. For people with international business accounts, however, Wise is an excellent solution.
Finally, money transfer companies supply tailored services to people who expect to be transferring large amounts regularly. These companies shop around for the best possible exchange rates offered by international transfer brokers. Companies like Remitly usually rely on a single broker so they can’t play them off each other for better rates. Unless the amounts you’re transferring are exceptionally large, however, say in excess of $50,000 to $100,000, the advantage may be quite small.
One company I can definitely recommend is www.moneycorp.com. I met them at our recent conference in Denver and followed up with a couple of interviews to find out more about their products. If you’re planning on moving large amounts on a regular basis, they’re the perfect solution.
One thing to remember about all of this, however, is that the time to think about money transfer issues is before you go abroad.
It’s certainly possible to sign up for a money transfer service once you’re overseas, but it’s always best to educate yourself about fees, transfer limits and other matters before you sign up.
Similarly, it’s essential that you understand the rules for inward transfers of foreign currencies that apply to your foreign bank account. Here in South Africa, for example, we have to sign a form with the reserve bank once a year explaining the purpose of our funds transfers into the country. It’s relatively painless, but some countries might make you jump through more hoops.