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How to send money to someone
With so many ways to transfer money, here’s an in-depth comparison of various methods.
It’s easy to get confused by all the money transfer options out there. Which is cheapest? Which is fastest? And what are the pros and cons for each?
If your head is spinning, we’ve written this guide to clear the air. Learn about the differences between various methods to pick the one that works best for you.
The best options based on transfer type
Cheapest for domestic transfers: PayPal and payment apps
If you want to make the cheapest domestic transfer possible, try PayPal.Me and other peer to peer payment apps like Facebook Messenger and Google Pay. With these services, you can send funds to friends and family for free.
Though PayPal is an excellent choice for domestic transfers, you have better options for international transfers. PayPal can be expensive for sending money overseas.
Cheapest for international transfers: Online transfer services and potentially bitcoin
Online transfer services like XE, Wise and World First are known for low transaction fees and great exchange rates. Bitcoin could also theoretically be used to make an international money transfer at zero cost if you line up the right trades on a P2P exchange like LocalBitcoins.com.
Fastest for domestic and international transfers: Western Union and MoneyGram
Technically, PayPal and payment apps are fastest — you just hit “Send” and your recipient gets your transfer immediately. However, most of the time your recipient will need to withdraw the money to their bank account. Because that usually takes one to two business days, PayPal and payment apps may not be the fastest in terms of a complete transfer.
Instead, the prize for speed goes to Western Union and MoneyGram. When you send a transfer through one of these services, your recipient can pick up the money from any of thousands of agent locations worldwide within minutes.
Cost and speed comparison of different money transfer methods
Online transfer services
- Speed: One to six business days for a complete transfer (deposit, transfer and withdrawal)
- Cost: Approximately $3 to $10 transfer fee (fee may be based on percentage), with a typical 0.5% to 1.5% markup on the exchange rate
Recently, online transfer services like Wise, XE and World First have been giving banks a run for their money. They’re not necessarily faster (they could take longer than bank transfers, depending on how you’re sending your money). However, they typically charge lower transfer fees and offer much stronger exchange rates.
Bank wire transfer
- Speed: Up to two business days
- Cost: About $20 to $50 to send and $10 to $20 to receive, with a typical 3% to 5% markup on the exchange rate
A wire transfer is an effective way to transfer money domestically and internationally. It’s quite fast — usually completed within two days and often within a few hours.The only downside to a wire transfer is the cost. In addition to standard fees, the bank typically charges a large margin on exchange rates.
How banks make money off the exchange rate
How much is CAD $1,000 worth in euros? According to the mid-market rate, it might be worth 660 euros. The mid-market rate is the fairest representation of what one currency is worth in another currency. It’s determined by what buyers and sellers worldwide are willing to trade two currencies at — and the rate that banks and transfer companies use when they trade among themselves.
If you send $1,000 through your bank to your mother in Italy, you might think the bank will send her 660 euros, but you’d be wrong. The bank will charge a markup above the mid-market exchange rate. This means that instead of converting your $1,000 to 660 euros, it may convert your money to a smaller amount — maybe 610 euros. The bank will effectively make a profit of 50 euros.
Many consumers consider this a bank’s “hidden fee.” In fact, charging a margin above the exchange rate is common among all money transfer services. Even still, banks typically charge the highest markups.
Cash pickup services like Western Union and MoneyGram
- Speed: A few minutes for cash transfers; hours to a few days for bank transfers
- Cost: About $10 for the transfer fee, with a typical 1% to 3% markup on the exchange rate
Foreign exchange services like Western Union and MoneyGram have long been reliable alternatives to banks. They can be faster and cheaper, and they have physical locations — which makes transfers convenient if you only have cash. Your recipient can usually pick up cash at a local agent location in minutes.
With these services, you can also send money online with a credit or debit card or through your bank account. And you can simply have the funds deposited into your recipient’s bank account within a few hours. (Bank transfers may be more expensive, however.)
You’ll find that Western Union and MoneyGram tend to charge exchange rate markups that are between 1% and 3%. For example, if $1,000 is worth 660 euros according to the mid-market rate, Western Union and MoneyGram may convert your money to 630 euros instead, effectively making a profit of 30 euros.
- Speed: Typically one business day (including deposit, transfer and withdrawal)
- Cost: Approximate transfer fee of 0% to 2% domestic and 3% to 4% international, with a typical exchange rate markup of at least 2.5% above PayPal’s wholesale currency rate
PayPal is technically an online transfer service, but it doesn’t come with the same advantages of sites like Wise or XE.
For international transfers, PayPal charges a percentage fee and an exchange rate markup that makes it more expensive than other online platforms. (PayPal doesn’t publish its exchange rates, but it typically adds a 2.5% margin on the rate it gets from its own bank.)
The good news is that PayPal can be a good choice for domestic transfers. It charges nothing to transfer money if you pay with your PayPal balance or a linked bank account.
- Speed: One to four business days
- Cost: Transaction fees for deposits, withdrawals and transfers vary; exchange rate markups vary
Bitcoin is one of the most interesting ways to transfer money. However, it’s often not faster or cheaper than other methods.
It’s not faster, because you have to convert your fiat currency into bitcoins and then send the bitcoins to your recipient. After, your recipient must sell the bitcoins back to the fiat currency they want.
What is fiat currency?
Fiat currency is government-issued and -regulated money like Canadian dollars, US dollars, Japanese yen and euros.
It’s also not cheaper, especially because you’ll lose money on the exchange rate twice: once when you buy bitcoins and once again when your recipient sells the bitcoins.
For these reasons, it’s usually not a good idea to use bitcoin for a money transfer unless you’re using a peer-to-peer bitcoin exchange.
Using peer-to-peer bitcoin exchanges
Transferring through bitcoin isn’t usually cheaper or faster than sending money through a dedicated transfer service — but it can be.
The trick is to use a peer-to-peer (P2P) bitcoin exchange. If you and your recipient are willing to spend the effort lining up the right trading partners, you could theoretically complete an international money exchange at no cost.
Which method should you choose?
Each money transfer method has its pros and cons. However, cost and speed are primary concerns for most people.
If your recipient needs funds in just a few minutes, Western Union and MoneyGram are effective options. But if your recipient is willing to wait a few days, online transfer services and payment apps like PayPal are your best bet — they’re relatively fast, and they could save you quite a bit on your next transfer.
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