The Best Way to Transfer Your Money to Latin America

Banks charge an arm and leg for international transfers. You have other options.
The Best Way to Transfer Your Money to Latin America

Deciding to go on a big trip to Latin America is never going to be something that you regret. The region offers such a huge range of cultural and travel experiences that a great time is all but guaranteed.

Some of the logistical aspects of being away from home for a prolonged period can prove to be more of a buzz kill. Top of the list here is the question of how to get cheap access to the funds from your home bank account while in Latin America -- whether this be via ATM withdrawals or via international money transfers.

Why Would You Need to Make International Transfers?

ATMs are widespread throughout Latin America, meaning you can easily withdraw local currency from just about anywhere in the region. The problem is that doing so will almost always involve a fairly heft transaction fee.

Paying such charges is mildly irritating if you're just withdrawing the occasional bit of spending money. But if you need to make larger payments – for example, to book a travel excursion, to pay for Spanish classes or to rent a local apartment – the costs of cash withdrawals quickly mount up.

Not only that, but given the problems of street crime in some areas of Latin America, taking out huge wads of banknotes from the ATM is not always the most sensible course of action. (Take it from someone who was once mugged when withdrawing a stack of cash to rent a local apartment...)

to avoid any potential security issues, you may look to international bank transfers when making large(ish) payments

To avoid any potential problems of this type, you may consider international bank transfers as a better way to make large(ish) payments. But, while this does minimise the risk of your hard-earned cash getting pinched on the street, it is not entirely cost free either. In fact, thanks to the excessive charges and commissions from the banks and various other intermediaries in these transactions, it'll still feel like plenty of other people are taking money out of your pocket.

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What’s Wrong With International Bank Transfers?

Conventional transfers, made through the banking system, end up being expensive as they pass through plenty of people's hands. Your bank will make a series of transactions with currency brokers and other intermediaries to negotiate the sale of your currency and the purchase of another one.

charges are high even from banks which claim to arrange 'free' international transfers

If you’re a US citizen staying in Brazil, for example, they will trade with several other parties to arrange the sale of your US dollars and the purchase of Brazilian Reals. As each party will take their cut, the effective costs to you will be high – often in the region of $40. This is true even where banks claim that they offer ‘free’ international transfers. In such cases, they or other parties along the way will just adjust the exchange rate, instead of directly taking a commission, in order to make their profit.

What’s worse is that charges might be applied both to the sender and the recipient of the funds. So, even after paying over the odds for your transaction, you might still find that the person you’re paying feels that they’ve been short-changed as the cash that has hit their account is less than what was promised.

The Cheaper Alternatives

Other options are much cheaper. TransferWise, for example, works a little differently in that it cuts out some of the financial intermediaries, instead using its own peer-to-peer system.

TransferWise is much cheaper as it cuts out the financial intermediaries, instead using its own peer-to-peer system

As you’re not exchanging money with financial intermediaries, but rather with someone exactly like yourself in another country (via the TransferWise platform), the costs are much lower.

Let’s take a simplified case study to see how this would work, ably assisted by a couple of fictional travelers and expats.

First off, meet John – a US citizen staying for a few months in Brazil:

Hi! I need to pay for some Portuguese language classes here in Rio. My bank account is in the US, but the school only accepts local currency.

Now, meet Rodrigo – a Brazilian who has just found moved to the US to start a new job:

Óla! I’m trying to rent an apartment here in New York and I’ve got to pay a big deposit to secure the place. I best wire over some of my savings from back home.

Rather than arranging for John’s money to leave the US and go to Brazil, and for Rodrigo’s cash to leave Brazil to go to the US, both sets of cash stay in their home countries. Instead, TransferWise effectively arranges for John’s money in the US to go to Rodrigo’s new bank account, while also arranging for Rodrigo’s money in Brazil to be sent to the language school John wanted to pay in that country.

As no currencies technically need to be changed, there are no traders and banks involved in the transaction and wanting to take their cut. Instead, the rate used between John and Rodrigo is a much fairer one: the mid-market exchange rate. Thus, even after TransferWise takes its small commission, the whole transaction ends up costing only about an eighth of what the banks would have charged both John and Rodrigo.

the whole transaction ends up costing only about an eighth of what the banks would have charged

In the real world, of course, these transactions are a little more complicated as the size of the outgoing and ingoing transfers very rarely match up precisely. But you needn’t worry about sorting this all out – this process is entirely managed by TransferWise, meaning funds will always be available for you to make the payment into the destination currency.

Is My Money Safe?

You might think that going outside of the ‘conventional’ banking system to make international transfers could be a little risky. But that isn’t really the case.

TransferWise is authorised and regulated by the UK’s Financial Conduct Authority (FCA) and is subject to European legislation, including the Payment Services Directive, that protect the customers of such services.

As well as having to continually demonstrate their financial solvency, companies (like TransferWise) that are authorised by the FCA have to keep their customers’ funds separate from their own.

This means, if such firms were to get into any financial difficulty, your money should be safe. In either case, TransferWise generally only holds your funds for a short period of time (sometimes just a matter of minutes, but other transactions can take a couple of days) which further minimises the risk.

Additional assurance can be gained from the fact that the company now handles transactions worth around USD700 million a month, and that it has around 1 million customers. TransferWise also has an average customer feedback rating of 9.5 out of over 32,000 reviews on TrustPilot.

Where in Latin America Can I Transfer To?

TransferWise is working to expand its transfer network to cover new countries and currencies.

In Latin America, you can currently make transfers from all major currencies (US dollar, British Pounds, Euros, Swiss Francs, Canadian, New Zealand and Australian dollars etc) into Brazilian Reals, Colombian Pesos and Mexican Pesos. You can also make transfers from Brazilian Reals into any of the above currencies, among others.

As regular users of TransferWise we are happy to partner with the firm to recommend its services. If you decide to do likewise, please support us by clicking on one of the above affiliate links to earn us a small commission on your transfer (at no extra cost to you).

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