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Banks vs. online money transfer services

Find the best way to send your international money transfer.

Updated

Fact checked

A slew of online money transfer providers promise to slash fees with stronger rates than you’ll find at your local bank branch.

Look beyond traditional banks to independent money transfer specialists competing for your business. Explore your transfer options by comparing expertise, costs, turnaround times and sending methods when it comes to getting your money to friends, family and businesses worldwide.

Online services that provide money transfers go by many names, including online service providers, money transfer services, forex companies, digital money specialists and more.

How they work?

Among all the services in a bank’s roster, sending your money for international deposit at banks worldwide accounts for a small chunk of its business. Even factoring in exorbitant commissions, banks stand to make far more money on their bread and butter — lending money.

This is where overseas money transfers specialists shine. Focusing their business on moving and exchanging money exclusively, they’ve become more efficient than even the biggest banks. By offering you stronger exchange rates at lower fees, often with faster turnaround times and better customer support, online service providers are the better way to send money abroad.

Banks don’t focus on money transfers, online service providers do.

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Who offers lower fees?

Banks

With fees that can range from $20 to $60 or more, depending on where your recipient lives or conducts business, banks are the more expensive option. Not to mention hidden fees in the form of high markups on the mid-market exchange rate.

Online service providers

Online money transfer companies offer a safe, affordable alternative with transparent fees — if they charge anything at all — and strong exchange rates to more than 200 countries worldwide. Depending on which provider you choose, some even let you lock in an exchange rate on future transfers.

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Winner: Online service providers

Banks are convenient, but you’ll definitely save money by comparing your options with an online service provider.

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Who offers better exchange rates?

Banks

On average, the rate your bank will exchange money for you is typically between 4 – 6% above the mid-market rate, sometimes even worse.

So if you need to send $1,000 to Mexico:

  • If the mid-market rate is 1 USD = 25 MXN
  • A bank’s exchange rate could be 1 USD = 23.5 MXN

Online service provider

Exchange rates are usually where online service providers shine by offering rates close to, if not exactly at, the mid-market rate. So if you’re sending $1,000 to Mexico and the mid-market rate is 1 USD = 25 MXN, that’s the rate you’ll often get.

Always pay attention to the exchange rate when comparing online service providers to make sure you’re getting the best deal.

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Winner: Online service providers

You’d be hard pressed to find a bank that offers the mid-market rate. This rate is especially important when sending larger transfers, as the difference of a percent or two can quickly add up.

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Let’s crunch the numbers: Sending $1,000 to Mexico

Let’s say you need to send $1,000 to friends or family. Here’s what you might face as far as fees and exchange rates as of March 23, 2020.

Online service providerBank transfer
Fee$3.99$25 + additional correspondent bank fees
Exchange rate1 USD = 24.945 MXN1 USD = 23.422 MXN
Transfer speedWithin an hour2-5 days
Amount receivedMXN 24,845MXN 22,836
Verdict
  • Better value and faster
  • Slower and more expensive

Aside from the convenience of already having an account, banks are the worse choice because they are both slower and more expensive than an online service provider. Sending with a money transfer service will get more than 2,000 extra pesos to your recipient.

Who’s faster?

Banks

Banks typically rely on the SWIFT network to send transfers, and the process involves many steps. On average, you can expect your bank transfer to take anywhere between two and five business days.

Online service provider

Depending on the currencies involved and your payment method, it could take up to four business days for your recipient to see your cash. However, some services provide transfers within minutes — so if you are in a rush to get the money to your recipient be sure to explore your emergency cash transfer options.

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Winner: Online service provider

With nearly instant options for sending cash, there will always be an online service provider that is faster than a bank.

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Who offers more options?

Payment MethodsMinimum and maximum transfers Delivery methods Transfer speeds Countries and currencies
BanksBank accountDepends on your bankBank transfer (SWIFT)2 – 5 business daysDepends on your bank
Online service providersCash, credit cards, debit cards, bank account$1 minimum, no maximumCash, mobile topup, bill payment, bank account, straight to debit cardInstant – 4 business daysGlobal
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Which requires more information?

Banks

Whether you choose a bank or an online money transfer company, you’ll need to open an account or register as a customer first. But that’s where the similarities end.

Even if you already hold a bank account, your branch may not offer online wire transfers. If they do, they may require an additional account or even ID with each wire transfer you initiate.

Online service providers

Online money transfer providers streamline the process with intuitive forms and minimal steps to indicate how much you want to send, where it’s going, how you’re paying and how quickly you want it there. And with the best provider, you can get it all done in a few minutes flat.

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Winner: Online service providers

Banks almost always require you to have an account with them to send a money transfer, which involves many steps. Online service providers may require your ID, but you can typically have your transfer sent within 5 minutes of signing up.

Which is more secure?

Banks

Banks use 256-bit encryption to keep your data safe when you’re sending online, and strict government regulations mean banks have to know who their customers are.

Online service providers

Most online service providers also use 256-bit encryption to secure your data and require ID verification to send money. But overseas providers may not have the same kind of regulations, so you’ll need to make sure the company you’re using is secure.

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Winner: Tie

Both can be fully secure, but you’ll want to make sure you are using a reputable online service provider for your transfer.

Check out what online transfer services are available

Min. Transfer Amount Transfer Speed Online Transfer Fee Rate Amount Received Description CTA Details
GBP 1,000 1 - 2 days USD 0.00 0.846 EUR 4,229 Exclusive: Minimum transfer of $1,000 for Finder readers (normally $5,000).
For larger transfers, get no transaction fees and no maximum send limits.
Go to site Show details
$1 Same day USD 0.00 0.851 EUR 4,253 XE offers fast transfers with no fees and a range of foreign currency tools. Go to site Show details
$0 1 - 2 days USD 1.99 0.837 EUR 4,185 Special offers like free transfers and better exchange rates available for new customers.
Quick, affordable transfers around the world with both express and economy options.
Go to site Show details
$1 1 - 2 days USD 40.00 0.854 EUR
4,238
Enjoy high maximum transfers into more than 20 currencies while saving up to 90% over local banks. Go to site Show details
$1 Within an hour USD 3.99 0.851 EUR 4,251 Use promo code 3FREE to send your first 3 transfers with no fee. Send to 110+ countries for bank-to-bank deposit, cash pickup or mobile top-up. Go to site Show details
$50 1 - 2 days USD 0.00 0.849 EUR 4,247 InstaReM offers quick and simple international money transfers with the ability to earn loyalty points. Go to site Show details

Compare up to 4 providers

Disclaimer: Exchange rates change often. Confirm the total cost with the provider before transferring money.

Bottom line

Both banks and specialized money transfer providers can help you get your money to its intended recipient— but transfer providers tend to be cheaper and faster. To get the best deal, compare money transfer providers before getting started.

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