Gone are the days when the only way you could transfer money to your loved ones was through postal money orders. Now, thanks to technology, the world is in our pocket and online fund transfers can be successfully done in a matter of minutes. You can even use your cell phone to initiate a fund transfer. Having said that, traditional offline methods like demand drafts and cheques are still very much in use. For instance, most outstation educational institutes still prefer demand drafts as the mode of payment.
Mode of transfer
You can transfer funds online using net banking as well as mobile banking for fund transfers within and outside India. For remitting money abroad, you can consider money changers such as the Western Union or the wire-transfer facility offered by banks. You can also opt for more traditional, offline means like cheques and bank drafts.
For online fund transfers, before you can actually transfer the money, you need to add the recipient as a beneficiary. You need to provide their account details and IFSC code to add them to your beneficiary list. This might take anywhere between 30 mins to 24 hours, depending on the services offered by your bank.
If you’re going with offline options, make sure you ask your bank to list out its affiliate banks through which you can transfer money smoothly. For example, Federal Bank of India has tied up with the Arab National Bank of Saudi Arabia and Doha Bank of Qatar.
Another factor to take into account is the amount of money you want to transfer. While there’s no limit on demand drafts, you will need to limit your NEFT/RTGS transactions to Rs. 10 lakh, per day. For IMPS, it is Rs.2 lakh.
Speed of disbursement
If you urgently need to transfer money, an online transfer is your best option. You will have several options linked with your bank account, like NEFT (National Electronic Funds Transfer), or use SWIFT, which is an international wire transfer system. You can also try the ‘direct transfer to bank accounts’ option which moves money in real time.
Offline options definitely take more time, especially if foreign currency is involved. The recipient might have to wait for 7 to 15 days to encash the cheque, as the bank will first verify the deposit. If you’re using the Money Order facility to send money, it might take anywhere between 3 to 30 days. Transferring money through a Credit or Debit Card will be relatively quicker, taking only 1-4 days.
Coverage offered
While the internet has been spreading its web across the country, online money transfer options are still available mostly in urban areas. If you are transferring money abroad, you also need to check if the currency you want to transfer is accepted by the bank. As a general rule, the US Dollar, Euro and Pound Sterling are accepted by all banks. But not all banks will let you transfer money through foreign currency cheques. If you are an NRI, one good option for you will be to open a Foreign Currency (Non-Resident) account. You can also hold this account jointly with your relatives in India. With this account, you can transfer money in all freely convertible foreign currencies like Japanese Yen, Hong Kong Dollar, Deutsche Mark, Bahrain Dinar, and Australian Dollar, along with the US Dollar, Pound Sterling and the Euro.
Cost of service
Let’s talk about the cost of transferring money. While you have many options available, the more reliable and secure ones are going to pinch your wallet more. According to a survey by the RBI, SWIFT is more expensive than demand drafts and cheques. Usually banks don’t charge for small RTGS transactions while NEFT transactions can cost Rs. 2.50-Rs. 25 per transaction. Money transfer services like Western Union charge a rate higher than most banks as well. Also, keep an eye on hidden charges like service tax. Note that all NEFT/RTGS/IMPS transactions are subject to service tax, which stands at 15% currently.
Convenience
It’s not just the speed and cost, but you also need to take into account the mode of transfer that will be most convenient for you and the recipient. Some people, especially your parents or the elderly might be more comfortable with an offline mode of payment transfer.
Additional Reading: 8 Instant Money Transfer Solutions You Didn’t Know About
Before you decide to go ahead with a particular money transfer service provider, learn more about its refund policy and its redressal system if the money isn’t received within the stipulated time frame. We suggest you choose a reputable bank or money transfer service which has established systems in place so you don’t need to worry about the safety of your fund transfer.