Pros and Cons of Traditional Money Transfer Options

For decades, the need to send money overseas or to faraway places has existed for millions of people.  There are a variety of reasons that people need to send money, including migrant workers sending remittances to home countries, children pursuing educational opportunities around the world, or just the simple buying and selling of goods and services from other countries, which is becoming increasingly common in today’s global market.

Traditionally, people who needed to send money have turned to options such as money orders, money transfer organizations, and bank transfers to facilitate the flow of funds, each with advantages and disadvantages.

Money Orders

A money order is a document that orders a sum of money to be paid to the recipient of the money order.  One advantage of a money order is that because it is prepaid by the person sending the money, many foreign financial institutions feel safer honoring a money order than they would a foreign check, since it’s impossible for a money order to bounce.  Money orders are also easy to find, with almost any bank or Post Office in the US willing to issue a money order.

The biggest downside to using money orders is that it can take a great deal of time for the money to arrive at its destination, especially if the funds are being sent overseas.  Consumers can choose to pay extra for the mail to arrive within a specified time, but this can be very costly.  In other words, if you need money to arrive in Europe within the next 24 hours, a money order simply won’t get the job done.  Also, there are limits to how much money can be sent in one money order, so it’s possible that multiple money orders would need to be purchased to send large sums of money.

Money Transfer Organizations

If the only thing that matters is speed in completing your money transfers, these can be a viable option.  Transfers can be initiated in person, online, or over the phone, making these organizations convenient and easy to use.  The money generally can be picked up within about 30 minutes through an agent at its final destination.

The downsides to money transfer organizations are the costs and the limited delivery areas.  While you’re getting speed with these companies, you will pay for it, and there are now other methods just as fast that cost significantly less.  Also, if your recipient isn’t near an agent on the receiving end, accessing the cash will be difficult.

Bank Transfers

Through banks, consumers can draw personal checks or wire funds internationally.  Wiring funds is certainly faster, but the fees can be much higher than comparable methods.  Personal checks often get placed on hold for weeks before they clear, making your recipient wait too long to receive their money.

These traditional methods still work for sending money, but there are also new options that are faster, safer, and more cost effective.  As a consumer, it’s worth taking the time to learn about new methods of sending money that are very likely a better fit than these traditional methods.

Technology’s Impact on Money Transfers

Although it’s not an everyday occurrence for most people, many of us have had the need to send money overseas as quickly as possible at one time or another.  Maybe a friend or family member lost their credit or debit card and needs access to cash.

Perhaps a son or a daughter studying abroad was not as careful as they should have been about maintaining a healthy account balance.  Whatever the case, it’s much easier to send money fast to faraway places than it used to be.

Technology has not only provided more efficient ways to send money, it’s also provided a more competitive landscape for money transfer services, making sending money more affordable for the customer than ever before.

The Internet is the element that makes money transfers much easier than ever before.  Regardless of where you are in the world, you can access numerous methods that will allow you to send money 24 hours a day to hundreds of countries around the globe.

Accessing bank accounts is easy, and if you’re trying to transfer funds to a customer within the same financial institution, it can usually be done almost instantly even at little to no cost.  Sending money to a bank other than your own usually takes about 24 hours and may have a slightly higher fee, but it still easy to do if you have all of the required information.

Making the transfer is easy if moving money between banks, and will be effective as long as the recipient has access to the funds once the transfer has been made.  An ATM or debit card is the easiest way to access the funds 24 hours a day.

Banks often impose daily limits that restrict the amount that can be accessed via an ATM machine each day, but it’s generally a high enough amount that the recipient will have enough cash to meet their needs.  ATM fees are usually minimal but should be considered if an exact amount needs to be received.

If the recipient is in a country where they have no banking relationships, the best way to send money is either through a wire transfer or by sending a prepaid debit card.  Wire transfers can be costly, but they are generally an effective option.

An even better option, however, is to send a prepaid debit card that is received within a couple of days and can be used over and over again.  This is just as easy to set up as a wire transfer and it will make future money transfers possible with just a few clicks of the mouse.  This is a secure way to send money, as the only person who receives the PIN number is the person sending the money.

There are limits to the amounts that can be sent through these online services, but the costs are generally low and they are easy to use, even for someone that hasn’t sent money anywhere before.  Thanks to technology, sending money is easier and faster today than ever before.

Banking in India

With a population of over 1 billion, India is an exciting environment for banking, with cutting edge technology leading the financial scene in India into the future.  India has 32,342 ATMs as of December 31, 2007, but an increasing number of customers are finding that the need to visit a bank branch or ATM machine is not what it used to be, thanks to exciting technological advances.

Banks are moving toward allowing customers to complete banking transactions using mobile phones and other handheld technology.  Banks in the past had used technology such as text messages to advertise promotions for customers, but electronic transactions will probably replace many types of cash transactions in India within the next few years.  The use of technology in banking lowers transaction costs and reduces the need for rapid branch expansion.  Currently, 8% of banking transactions in India are completed online.

This idea of handheld banking technology is called Mobile Banking, and it is predicted that mobile banking will revolutionize the banking industry in India and eventually around the world.  Already, 85-90% of mobile bankers do not use debit or credit cards; they simply use their phone to complete transactions.  The technology used to make this style of banking possible is the same technology that runs ATM machines, although it’s much cheaper to maintain.  India is truly on the cutting edge in this rapidly growing area of finance

An increasing number of Indians are also using the Internet for banking purposes, although the majority of bank customers using the Internet limit their activity to checking statements and determining whether or not transactions have been completed.  The Internet also allows bank customers to interact with bank employees to ask questions and inquire about bank products and services, although this is not heavily utilized so far by Indian bank customers.

Traditionally, Indians have not carried a great deal of debt, with consumer debt making up only 4% of the country’s Gross Domestic Product, compared with over 60% for countries such as South Korea and Taiwan.  Banks are eager to participate in the increasing debt loads of Indian consumers.  Like China and South Asia as a whole, India is one of the largest growing areas for credit card, debit card, and cash card services, and studies predict that the credit card market in this region will grow by 15-20% over the next three years.  Indian households currently save 28% of their disposable income.

The banking presence is growing in India, as more International banks and financial companies rush to compete for the growing banking needs in the country.  Demographically, half of India’s 1.2 billion people are under the age of 25, so over the next several years, a huge generation of people will be entering their earning years and will have diverse banking needs.  The banks that find a way to provide the services Indian banking customers enjoy a windfall of new customers and profit in the years to come.

Remittances to Asia

Over half of the migrant workers in the world come from countries in Asia, making remittances of funds earned overseas to developing Asian countries an important element of their economies.  Countries like Singapore, the Philippines, South Korea, Hong Kong, and Thailand regularly see citizens moving abroad to earn money and send a good portion of that money home to support their families.

There are essentially two types of migrant workers.  First, there are people who move to developed nations and seek labor when they arrive.  Many of these workers become permanent citizens and stay in these foreign countries for extended periods of time.

The second type of worker is a contract worker who agrees to work abroad for a specified period of time.  There are several regions and industries that commonly recruit contract migrant workers.  From Asia, many of these workers end up in the Middle East.

Tracking remittances to Asia is difficult, as it is estimated that less than half of these remittances go through traditional money transferring methods.  It is estimated that the number of remittances going through channels that can be tracked will increase as methods are developed to make the remittance process easier, developments that have already arrived and are being used with greater frequency.

Asian governments know what an important element of economic growth remittances can be.  In the 1990’s, remittances accounted for over 5% of the Philippines Gross Domestic Product.  During the year 2000, the government in the Philippines encouraged migrant workers living abroad to remit even more to help save their struggling economy.

Some economists fear that countries like the Philippines are relying too much on remittances instead of growing their economy organically and working to attract foreign investment.  While remittances are generally stimulating for an economy, they can also stunt economic growth if relied upon too heavily.

One of the reasons that many Asians use non-traditional methods to send money home is that some Asian governments have attempted to regulate and impose taxes on remittances.  South Korea, for instance, forced migrant workers to remit at least 80% of the money being sent home through the national banking system.

Other countries have tried to adopt similar rules, but have been met with great resistance.  Another reason that traditional methods are not always used for remittances is that the infrastructure to receive money transfers is not in place in many rural areas of developing nations.

The most important lesson that Asian governments can learn in order to maximize the positive impact of remittances is to make it as easy as possible for citizens working abroad to send money home.  Remittances should not be relied on as a sole source of economic growth, but should be coupled with sound planning for internal, organic growth.

Training and education should be provided for migrant workers who return to their home country with money to help them make wise decisions in managing those funds.  Finally, ensuring a government free of corruption will help to increase the use of traditional remittance methods and instill confidence in the financial system in these developing nations.  www.atmcash.com

Using a Bank to Send Money Overseas

When looking to transfer money overseas, there are many options available to choose from.  Each option has several pros and cons that need to be considered in order to ensure that your goals are met in completing the money transfer.  There are several characteristics of a money transfer that need to be evaluated to determine how important they are to the sender of the funds.

Some of these variables include the amount of time it takes for the recipient to have access to the funds, the costs of making the transfer, the method used to determine exchange rates, the ease and convenience of initiating the transfer, and the level of security and protection from fraud that is provided.

For decades, consumers had relatively few options for sending money.  They could do it the old fashioned way, sending cash or a check through the mail and hoping it arrives in one piece, leaving it up to the recipient to convert it to the local currency.

There were money transfer services, which come with high fees and limited areas of feasibility since an agent must be present for the sender and the recipient.  And finally, banks could facilitate the transfer.  This article will present some of the pros and cons of using banks as an intermediary in sending money.

Most banks in North and South America, Europe, Australia, and many parts of Asia will allow customers to transfer funds to banks overseas.  Generally, customers must be citizens of the originating country with an active bank account and valid identification.

Customers will usually need to know the address of the bank to which the funds are being sent, including an international bank ID number called a SWIFT code.  The exchange rates are determined by the bank and change daily, so it’s a good idea to ask your bank about the methods they use to determine the exchange rate of the funds being sent.

There are several pros in using banks to facilitate money transfers.  First, there are very few restrictions regarding which countries you can choose to send money to as long as you have the information required for the receiving bank.  Second, many of these transfers can be initiated online, without even having to set foot inside a bank branch.  Next, there is no middle man to act in behalf of your recipient, increasing the security and safety of the transfer.  Finally, there is usually less paperwork involved in a direct bank transfer than in some other methods.

There are a few negative aspects of using banks to send money that need to be considered.  First, the costs associated with sending money through banks can be substantial.  Usually both the originating bank and the receiving bank charge fees for the services provided.  Also, it can be difficult to find information on the exchange rates being used by banks on the Internet.  This option is good for occasional transfers, but the high costs should inspire people who transfer funds regularly to find a more effective method.

Finally, the advent of debit cards has greatly changed the way we can now send money.  Debit cards can be sent and used almost anywhere in the world with money loaded onto the card.

Money Transfer Tips

For just about everyone, there are occasionally instances where it is necessary to send money to someone using a financial intermediary.  Perhaps you have family members living overseas and wish to remit money to them from your paychecks in the United States.  Maybe you are purchasing goods or services and need to transfer funds to complete a transaction.

There may even be situations where someone you know is in a pinch and needs access to money fast.  Whatever the reason, it’s helpful to know the options that are available for transferring money.  The following tips will help to ensure that you make the most efficient and cost effective decision when sending money through a financial intermediary.

First, if you have a little extra time to complete the transaction, take it!  While it sometimes may be necessary to send money in the fastest way possible, there will be other instances where the money doesn’t  need to arrive for a couple of days.

Sending money instantly is far and away the most expensive way to send money, so if you’re able to delay the transfer, you’ll save money.  Most money transfer companies have options that delay the completion of the transaction by a couple of days, and these options are considerably cheaper.

Next, take advantage of direct deposits to bank accounts when you can.  This will not always be possible, especially when sending money overseas.  However, when the recipient of the funds has a bank account that you can deposit the money directly into, the savings come from eliminating the middle man.  Without using a direct deposit feature, the fund must be redeemed through an agent, which will almost always charge a fee to complete the transaction.

Third, it’s essential to understand the exchange rate fees when sending money internationally.  Most companies that will facilitate the transfer of money overseas will charge a fee to do so, but they also make money by giving a less than favorable exchange rate and pocketing the difference.  Before sending money through any company or system, find out how they calculate exchange rates and compare the rates being charged to true market exchange rates.

Fourth, do your research!  There are new ways to send money overseas and to other financial institutions emerging all the time, each with its own set of rules and fees.  The money transfer industry is a competitive one, and the biggest names don’t always have the lowest fees.  Shop around, as there is a good chance you’ll uncover a method of sending money that is faster, more secure, or cheaper than you might think.  One example is a company called atmcash.com.

Finally, think about the person that is receiving the funds, and make it as easy for them as possible.  Simple things such as having the correct personal information for the recipient of the funds will make redeeming those funds much easier.  It’s possible to add a security question in many transactions that will keep the money from getting into the wrong hands.  Put yourself in the recipient’s shoes, and you’ll find a method that works well for the sender and the recipient. www.atmcash.com