International Wire Transfers: 3 Factors to Consider

Need to know the best method to send money overseas? Paper checks are out of the question—they’re susceptible to a number of risks, including theft in the mail—so you’re left with a choice between two payment methods: an international wire transfer or a direct deposit of funds using local bank networks, also called global ACH. Both ways essentially do the same thing, which is transferring money from one bank account to another, but how the money gets transferred affects when the money arrives at the destination, the cost of the service, and the dollar amount you’re allowed to send internationally. So which payment method should you choose? Weigh them against these three factors—speed, fees, and regulations—to determine the payment method that best meets your needs:

1. Speed

If you need to get the money to the destination bank account, then there is a clear winner: international wire transfer. Typically, funds sent through an international wire transfer only takes two days to arrive because you’re sending the money directly from one bank account to another. In other words, the banks (the sender and the receiver) are in direct communication with each other. You’ll need a bank’s SWIFT code of the overseas bank to complete the international wire transfer.

The direct deposit method for overseas remittances (known by international local bank transfers, international ACH transfer, and global ACH) and takes a couple more days compared to the speed of an international direct deposit transfer. Instead of communicating bank to a bank, the direct deposit leverages the clearing network in the country of the destination bank. For example, the clearing network in the United States is NACHA (National Automated Clearing House Association), and in Europe, the clearing network is SEPA (Single Euro Payments Area). Funds transferred through the direct deposit method are processed in batches or groups with other transactions also using bank transfers, which means the process can range from a few hours to a few days to complete.

2. Fees

When sending money overseas, you’ll also need to consider the cost. International wire transfers charge a hefty fee not only to send money (as much as $50) but also to receive the funds (as much as $10).  Additional fees are assessed depending on the currency. Also, consider that banks typically charge a fee to convert the dollars to the currency of the destination country. Global ACH direct deposit fees hover around $5, a cost that’s significantly less than an international wire transfer.

3. Regulations and limitations

When choosing between an international wire transfer or a global ACH direct deposit, you’ll also need to consider the amount of money you’re sending overseas and the frequency. Each financial institutions like banks, credit unions, and money transmitters have different minimum and maximum limits on the amount you’re able to send. These institutions also have other restrictions on the frequency of overseas wire transfers or international direct deposits; frequency limitations include per day, per month, or per person. Direct deposit global ACH is ideal for payments that occur in regular and high frequencies, such as paying a contractor overseas.

Consumers have federal protections for international wires and direct deposit transactions. Financial institutions  are required to disclose the following information:

  • The exchange rate
  • Fees and taxes charged by the banks, intermediary institutions and other third-party agents
  • When the money will be available at the account destination
  • How to cancel transfers and correct errors

Financial institutions processing a direct deposit of international transfers are required to follow the guidelines set by the Office of Foreign Assets Control (OFAC). The regulatory agency enforces economic and trade sections against specific foreign countries, banks or individuals based on US foreign policy. Banks are required to screen global ACH payments to ensure that the transaction complies with OFAC regulations.

As a company, choosing between sending money via an international wire transfer or a global ACH depends on factors that make the most sense for your business. You may want the money to arrive at the foreign bank the soonest possible, but it most likely will come at the cost of higher remittance fees. Institutions like Tipalti offer businesses other alternatives to sending money to cross-border accounts. Tipalti helps companies save money by switching payments from expensive international wire transfer to global ACH (aka local bank transfer) in countries where that is an option.