Sending money abroad without spending a fortune?

Finding the cheapest way to send money abroad isn't always easy. The actual cost can vary depending on several factors:

• the payment service provider (bank, postal service, money transfer operator);
• the amount you wish to send;
• the countries and currencies involved;
• the transfer time;

and, just as important,

• the payment instruments used to send and receive the money (e.g. cash, payment cards, credit transfers).

The total cost for the same type of transaction, using the same provider, can also vary over time.

What do we mean by 'total cost'?

The total cost is the difference between the amount the sender pays and the amount the recipient actually receives. It generally includes three elements:

• the fee(s) and any taxes applied by the payment service provider when sending the money;
• the exchange rate used (when two different currencies are involved);
• any fees and taxes charged when the money is received.

In particular, the exchange rate applied by the provider often includes a hidden fee: the difference between their rate and the real market exchange rate (the one used between banks and professional investors) is known as the spread or margin.

To get an idea of the different options available, their costs, and the possible combinations of providers and methods, you can start by checking:

• https://remittanceprices.worldbank.org;
• https://www.mandasoldiacasa.it/en.

These are very useful tools - but not always enough. The lists they provide may not include all options, and prices can be outdated or inaccurate. So what should you do?

The best strategy is to compare before and check after. Here's how.

Rule No. 1: compare before you pay!!

Ask for multiple quotes - either online or at provider branches - to find out how much your recipient will actually receive for a given amount and chosen payment method. Providers use different pricing models and it's often difficult to piece together individual cost elements. For this reason, the actual amount the recipient receives is the most important piece of information.

Keep track of all quotes, compare them, and choose the provider and method that ensures your recipient receives the highest amount in the desired timeframe. Since exchange rates and fees can change daily, make sure to get all quotes on the same day.

If a provider cannot tell you exactly how much your recipient will receive, try to collect all the relevant information: the fees and taxes charged at the point of sending; the exchange rate used; any fees and taxes the recipient will need to pay on receipt. This last bit is often missing, particularly when the sending and receiving agents are different (e.g. Bank X in Country A and Bank Y in Country B). In such cases, ask Bank Y how much will be charged to receive the money.

Rule No. 2: Check after you pay!

If you don't manage to collect all the cost details before making the transfer, you might decide to go ahead anyway. But don't forget Rule No. 2: check the costs afterwards.

Once your recipient has received the funds, you'll likely be able to gather the full picture and calculate the actual total cost of the transaction. The cost calculator will once again be very useful.

Bear in mind that comparing multiple providers every time you send money can be time-consuming. Avoid the temptation to rely solely on the first provider you try or to choose based on friends' or relatives' recommendations.

And if you use the same provider repeatedly, make sure to check the costs regularly. Keep track of what you're paying and look out for price increases - if others offer better value, don't hesitate to switch.

Final (or first?) tips: Stay alert

Before sending money abroad, here are a few more tips.

The reliability of the provider is crucial. Check customer reviews on platforms like Google or Trustpilot, especially if the provider is not well known.

In Europe, all payment service providers must be authorised and supervised by a public authority. Ideally, you should check which authority supervises your provider. Here you can find authorized providers supervised by Banca d'Italia.

If you plan to send money regularly - for example, as remittances - you might consider opening a current account, either online or at a physical branch. The cost may be worthwhile: you could benefit from lower fees on transfers and gain access to other useful banking services (e.g. payment cards, investment options).

Banks and online trading platforms may offer multi-currency accounts, allowing you to convert money yourself at more competitive rates and transfer funds abroad more efficiently.

Thanks to financial technology innovations, many new players are entering the market, increasing competition and helping to lower costs. Some newer providers offer international money transfer services tailored specifically to the needs of migrants. Keep an eye out.

Lastly, if your income allows you to save, consider where to keep most of your money: in your country of work or in your home country. Typically, in your country of work, you may benefit from currency appreciation, but earn lower interest on savings.

On the other hand, in your home country, your currency may depreciate, but you might earn higher interest rates. Also, sending larger amounts less often may be more cost-effective than sending small amounts frequently.