Sending Money to or from Germany and Europe

Here are some typical foreign exchange situations: (1) You’re moving overseas and want to transfer some or all of your funds to a new location. (2) You want to fund a real estate purchase abroad. (3) You need to pay business expenses in a currency different than your own. (4) You need to make a large or medium-sized payment outside your own country, and a credit or debit card isn’t a good option. – These are just a few examples of when you may have to get involved with some form of foreign exchange (forex or FX for short).

Your money isn’t gone, my friend. It’s just that someone else has it.
Ihr Geld ist nicht weg, mein Freund, es hat nur ein anderer.
— Banker James Mayer de Rothschild

You have several options, some better than others. The best way to make an international transfer of funds depends on several factors. Cost is obviously one of the most important, but speed and convenience are also factors to consider. Additionally, you need to know that the fees charged to transfer your money are only part of the cost you’ll pay. “No fee” does not mean “no cost.” All banks and forex firms also take a cut from the exchange rate, some more than others. Being well informed can save you money!

The euro symbol (€) on display in Frankfurt am Main, where the European Central Bank has its headquarters. The euro is the official currency of 19 EU countries, including Germany and Austria. PHOTO: Hyde Flippo

For instance, because the German banking system functions differently than the US banking system, it’s not a good idea to simply write a US check and send it to someone in Germany. By the same token, transferring funds in the opposite direction – from Germany to the US — also requires an awareness of the differences between banking practices in Europe and North America, and the fees charged to the sender and receiver.

In the not-so-distant past, before the internet and electronic fund transfers (EFTs), a popular method of moving money across the Atlantic was the “international money order” or a bank wire transfer. While a bit old-fashioned, both are still possible, but newer options can save you money – often quite a lot of it. See our comparison chart below.

Today your currency transfer options include credit cards, remittance services (MoneyGram, PayPal/Xoom, Western Union, etc.), forex transfer firms (CurrencyFair, Global Reach, OFX, Wise, formerly TransferWise, etc. – usually with a minimum of $150 to $500 USD), and your local bank (usually the worst option). Even credit cards take a percentage of the exchange rate, and some add a foreign exchange fee. (Do you know if your card does that or not?) So let’s look at the various options and compare them. Below the comparison table we’ll examine the three main options in more detail.

As you can see from the comparisons above, you are almost always going to get the best deal with an FX transfer firm. And the biggest factor in comparing international money transfer options is the exchange rate, the lower the better.

But there are other things to consider. Below we examine the three main options more closely.

Banks, Remittance Services and FX Transfer Firms

A Closer Look at the International Money Transfer Options
The best way to transfer funds internationally depends on several factors. The method you use will depend on the amount, type, and timing of the transaction. Certain options are more suitable for certain kinds of transfers than others. For instance, if you aren’t in a hurry, some FX transfer services let you hold funds until the exchange rate becomes more favorable. (You can set a target rate.) There are three main kinds of providers of international currency transfers: (1) banks, (2) remittance services, and (3) FX transfer companies. Each option has its own advantages and disadvantages.

When it’s more than small change, check out all your money transfer options. Euro banknotes (Europa series) PHOTO: ECB

Banks
Although your first thought when considering an international money transfer might be your bank, a bank or credit union is usually not the best choice. Some banks (see below) do offer competitive rates and services for transferring funds from your bank account to a foreign bank account. This includes wire transfers and other electronic currency transfers. The problem is that banks usually have higher exchange rates.

Almost any US or Canadian bank offers wire transfer services, but for a price. The average cost at the top ten American banks for an outgoing international wire transfer is $45.50, while the average cost of an incoming foreign wire transfer is $17.50.(1) Citibank has one of the best rates (outgoing as low as $30 online), while several banks charge $50 for the same thing. Since a bank’s wire transfer fee is a flat rate, no matter how much you’re sending, this option can be the best deal for transferring larger amounts of money. But banks have a hidden cost for international transfers that is sometimes difficult to determine: the bank’s foreign exchange rate. Don’t forget to look at the total cost, which also includes the fee charged by the bank at the other end of the transaction.

Remittance Services
Examples of remittance services are Western Union (WU), MoneyGram, and PayPal. Remittance companies are best for smaller amounts (up to $1,000) and when the recipient has no bank account. Western Union and others firms with physical branches offer international cash-to-cash (agent-to-agent) transfers. You give an agent cash and it gets transferred to another agent and converted to the local currency – dollars to euros, euros to pounds, dollars to pesos, etc. Some remittance services allow you to use a credit or debit card to make international money transfers, which usually reduces the transfer time but increases the cost. Some remittance services also offer an online option/app with cheaper rates. PayPal (and its Xoom service) is the best-known online remittance service.

PayPal: What began as a way to pay for eBay auction purchases has grown into one of the largest international remittance services in the world. PayPal often offers the best option for amounts up to about $500. Both parties must be PayPal members and that requires a registered bank account. PayPal also offers the convenience of a mobile phone app that allows you to send money using your cell phone. PayPal operates in almost every part of the world (Africa being a rare exception). PayPal also makes it easy to see your fees and the total amount the recipient will receive. Many Germans and other Europeans have a PayPal account.

Xoom: Now a part of PayPal, Xoom lets you send up to $2,999 for only $4.99 from a US bank account. (The fee is $60.99 when using a credit/debit card. Most banks offer a better deal.) Money can be deposited to any German bank account including Deutsche Bank, Postbank, Commerzbank, and Sparkassen. Most money transfers are deposited within two business days. A recent example, using Xoom’s online calculator: Transfer $1200 from a US bank to a German bank for a total cost of $1204.99. The recipient in Germany will receive €840.84 using the Xoom exchange rate of 1.00 USD = 0.7007 EUR. (Current rates will vary; the rate is fixed at the time of your transfer.) The Xoom website clearly states: “Xoom also makes money when it changes your US dollars into a different currency.” That is of course also true for any international currency transfer service. The only difference is the percentage rate.

In 2012 Consumer Reports ran a comparison of various international remittance services, but only using a scenario involving sending funds to Mexico from the United States. In that comparison, PayPal offered the best value for a $200 transfer, but not for $1,000. In both cases, Xoom placed in the top three. MoneyGram and Western Union both ranked low, costing more than most other services. The Consumer Reports comparison did not include any of the major FX firms or payments in euros.

Forex (FX) Currency Transfer Services
For larger international currency transfers or periodic, recurring transfers you should consider using one of the foreign exchange transfer companies, most of which are based in the UK or Ireland, but also have offices in North America and Asia. Forex brokers (not to be confused with forex traders) offer international currency transfers and payments to individuals and firms. They specialize in transferring funds from one country to another while converting one currency to another. An example would be the transfer of $75,000 from a US account to a German account and converting that amount into euros. The FX company makes money on the exchange rate, usually charging no other fees, or a low nominal fee. A forex broker can also lock in a certain exchange rate for the transfer. To use a forex broker, you set up an account and arrange for a one-time transfer or periodic transfers (usually with a discount). – Below you’ll find the foreign exchange services that we recommend.

CurrencyFair
Whether you’re working abroad and sending money home, buying a property overseas, repatriating your pension payments or paying for your children to study abroad – or you’re a business involved in making international payments – CurrencyFair can make it easy, saving you time and money. CurrencyFair began life with a mission to create a world of fair, transparent financial services for everyone. Dublin-based CurrencyFair handles funds in US dollars, euros, GBP, and a total of 18 currencies around the globe.

Clients are assigned their own personal consultant, who works with them to make sure they achieve the best exchange rates possible in the time frame they specify. There is also a CurrencyFair mobile app (iOS and Android) for those who prefer that. Most fund transfers can be completed in 2 to 4 business days. For more information, see the CurrencyFair website. They will be happy to talk about your requirements and discuss the various options available to you. Also see our forex tips below.

Wise, formerly TransferWise
Wise is a UK-based money transfer service founded in January 2011 with headquarters in London and offices in a number of cities including New York, Singapore, Budapest, and Tallinn (Estonia). Wise supports more than 750 currencies across the world including GBP, USD, EUR, AUD, and CAD.

Why choose Wise?

• Favorable exchange rates. Banks and other transfer services often set their own, unfriendly exchange rate – making it more expensive for you to send money. Wise always give you the mid-market rate, which is the fairest exchange rate.
• Transfer transparency. You always know where your money is. You’ll be updated via email at each stage of the transfer. You can also track your transfer with their award winning mobile apps and website wherever you are.
• Trust. A five-star rating (out of 5) on Trustpilot.
• Top customer support. No frustrating automated systems. Real people ready to help you, plus convenient online help.

Wise also offers a special debit MasterCard and Wise for Business. For more information, see the Wise website.

See our advice for economical international transfers below.

International Money Transfer Tips

Here are some ways to save money when transferring money internationally:

• Shop around and compare. Look for the option that best suits your needs.
• Transfer a large amount once, rather than smaller amounts often.
• Pay attention to tier limits. How much you pay usually depends on the amount of the transfer. Don’t transfer a large amount of money using a service geared more to smaller amounts, or vice versa.
• Pay attention to the total cost! The fees you pay may be low, but the exchange rate high. In order to make true comparisons, look at the total amount the recipient receives. Sometimes a higher fee is worth it if the exchange rate is better.
• Sometimes you and the recipient will get a better deal with remittance services if you send money in the local currency and let the recipient convert the amount into the local currency, getting a better exchange rate. Example: Send dollars to someone in Germany and let them convert the amount into euros. But for larger sums, a forex service will offer a better deal.
• Don’t pay for speed if you don’t need to. If the money doesn’t have to transferred within a few hours, you can save money by choosing a longer time period of time – a few days or even a week or more.
• Try to transfer funds in the morning, as most banks have a cut-off time in the early afternoon, and transfers after that are not sent until the following day.

Total Cost
No matter which type of money transfer service you use, the total cost of any international currency transfer depends on four main factors:

• The transfer fee charged by the bank or money transfer company
• The amount of money you are transferring
• The speed of the actual transfer (within minutes, hours, days, weeks, etc.)
• The currencies involved and exchange rate at the time of the transfer

1. Source: “Comparing Bank Wire Transfer Fees” (April 18, 2013), www.mybanktracker.com

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AT THE GERMAN WAY

• Banks and Money in Germany
• How to Open a Bank Account in Germany – A step-by-step guide
• The Euro
• Living in Germany
• Electrical Facts – 220 volts and all that
• The identity card – der Ausweis
• German Way Expat Blog

ON THE WEB

• Consumer Reports: “The best ways to send money abroad” (2012)

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