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If you are one of those who need to make international money transfers frequently, you know how expensive this can be. Admittedly, it’s getting better in some places. But sending money to developing countries might still cost you as much as 12% of the total amount! TransferWise is a company leading the change to this injustice. This money transfer service, and those similar to it, bring down the costs of such transactions to less than 1%. That seems like a fantastic deal, right?
It actually is as fantastic as it looks.
However, many people are wary of such money transfer services, and with good reason. These companies, TransferWise included, operate as a third-party in your money transaction. That’s why they can avoid charging high fees, unlike banks. But this also means there’s more risk to you as a customer. At least it seems so at first.
The good news is that if you understand exactly how the transfers work, you’ll see that you are quite safe. Of course, not all providers are equally reliable. But using TransferWise as an example will allow you to identify which online money transfer services can be trusted.
How Does a TransferWise Money Transfer Work?
First of all, you need to understand how TransferWise, and similar services, transfer your money. Knowing every step of the way will allow you to evaluate the safety of the funds on their journey from your bank account to the recipient.
So, here’s how it goes:
- Step one is you creating a TransferWise account. It doesn’t have to be connected to your bank account directly, so there are no risks from this direction. You can use a mobile app to register and make all your transfers, so all you need is an Internet connection.
- The next step is you transferring the money to the TransferWise account. You can send them directly from your bank account or use any other payment feature available in your country. Note that this transfer is happening LOCALLY! This means that you pay no fee, or a very small one, as you simply send money to a local account.
- Finally, TransferWise sends the equivalent of the amount you transferred, in the recipient’s currency, directly to their bank account. This transaction happens from the company’s account in the recipient’s country. For example, if you are sending money to France from the US, you will send dollars to the US TransferWise account and the company will send Euros to the recipient from their account in France.
That’s how simple this type of online money transfers is.
The important details that need an extra mention are:
- No money physically crosses the borders, so the fees can be kept to a minimum.
- The recipient doesn’t need to have a TransferWise account. The company will simply send money to their bank account.
Now, it’s only reasonable that you’d want to ask “is TransferWise safe?”
As you can see from how the transfer works, your money is definitely safe. You should also know that TransferWise is regulated by the UK financial regulatory authority and uses bank-grade encryption.
Simply put, it’s as safe as a bank transfer. And the fact that the company has been growing steadily over the last decade and maintaining a 95% customer satisfaction rate is proof of its trustworthiness.
How Exactly Does TransferWise Make International Money Transfers Cheap?
The most important thing that allows TransferWise to keep the transfers cheap is that it doesn’t use high currency exchange margins. Those are the main reason why bank money transfers are so expensive.
Online services either use the mid-market currency exchange rate, which is the lowest possible, or keep their margin very low. But bear in mind that these rates and markups change really fast. Therefore, if you want to save as much money as possible, you should always check the current rates offered by competing websites to TransferWise as well as the company itself. In some cases, you might be able to save more with other leading services. And as registering an account with them carries no obligation, you can choose what’s best on a case-to-case basis.
Remember that the most important thing that determines the reliability of these businesses is transparency. An honest company will be straightforward about its fees, so there’s no risk of paying any hidden charges. That’s why you should be looking for in an online money transfer service.
Take a look at TransferWise, which is one of the biggest and most trustworthy businesses in the industry. This company is completely straightforward and transparent. You can see the cost of the transfer without even registering. You simply need to use the calculator on the TransferWise’s website to do it. Moreover, the company is transparent about its activity and legal status. It regularly publishes revenue reports and you can easily find information about its funding.
The latter is extremely important because it allows you to see that the company truly does have the money to provide optimal service. As online money transfer platforms aren’t like banks, they don’t really “store” large amounts of money. Take a look at their process of operation, described above, and you’ll see that these businesses need to have a huge capital to provide quick and efficient service. It’s the only way for them to have enough money in accounts in different countries to make those transfers fast.
Any trustworthy online money transfer platform would be open about its financial information. It also should be transparent in explaining any fees beforehand, so every customer can understand how much the transaction will cost.
Bear in mind that these companies might offer margins and fees as low as 0.35%, but those largely depend on the country. Sadly, some transfers are still much more expensive. However, you can be sure that if there is an opportunity to use this type of service, it will cost less than a bank transfer.
It would also be as safe as a bank transfer, so you don’t have to worry. But remember to choose a money transfer website carefully. Double-check that it could be trusted through reviews. In this case, working with industry leaders, generally, is the best and safest option.