Moving money the modern way

JISHOU, HUNAN — You work in China, and get paid in Chinese currency. So how do you send US dollars in your bank account back home quickly and cheaply?

Short answer: PayPal.

Longer answer: keep reading.

Using myself as a real life example. here are the options, ranked from most expensive to least.

  • Bank wire transfer: $15-30 in fees, 2-3 business days for final credit
  • Western Union transfer: basically the same
  • Withdraw cash from an American ATM, using Chinese bank debit card: $7-10 in fees, very quick, but requires physical presence in the USA at the time
  • PayPal: 4% in fees, two websites, 1-2 business days for final credit
  • Bitcoin: 1-2% in fees, three to four websites, 3-4 business days for final credit

The hands-down winner in my case has been #4 for the last four years. Today I tried #5, to test one of the presumed advantages of Bitcoins and similar crypto-currencies — that they make moving money across national borders easy and cheap.

It was a little cheaper than PayPal, and almost as fast. As for easier. not so much.

Bank wire transfers

My contract allows me to take 70% of my monthly pay out and send it home. When I first came to China, the only option I had was to wire money from my Chinese bank to my American bank. It was a laborious process, requiring me to fill out a long form and to have a Chinese resident present to facilitate the exchange and transfer. A Chinese national ID is necessary for wire transfers, at least at my bank here in Jishou.

I had to transfer money from my account to my Chinese friend’s account. Next, it would be converted to dollars in the bank’s computer system and then wired via SWIFT to my US account. The wire fees were $30 total ($15 at each end), and the money took about 2-3 business days to land in my US account.

The whole process was a bit of a pain. It would take about 30 minutes to complete, and I had to drag along a Chinese friend to the bank each time.

I found another way, as you will see.

Western Union

My bank in the USA does not accept Western Union wire transfers, so for bank-to-bank transfers, Western Union is not an option.

For the sake of comparison, I checked online for their fees. Sending $300 (about 1800 RMB) would cost about $15 (90 RMB). Here’s a table from the Western Union-China website showing the fee schedule.

Two banks in China allow you to send Western Union transfers using online banking. Mine is not one of them. The fees are the same, no matter how you send the money, so there is no financial advantage to using online Western Union services in China.

A big advantage of Western Union transfers is that they happen almost instantaenously. That’s useful in an emergency.

ATM withdrawals

When I used a brick-and-mortar bank in the States, I could withdraw money from my Chinese account at an ATM with my China Unionpay debit card, and walk the cash to the bank. Now that I use Ally Bank — which is Internet-only — this procedure would require buying a money order and sending it by mail to Ally.

Of course, I have be in the USA for this transfer to work, so it’s only available once a year. Both my Chinese bank and the ATM bank charge fees, usually no more than $10 in total.

PayPal

From my days of trading on eBay, I have a PayPal account. When I learned that PayPal had a Chinese operation, I opened an international PayPal account and linked it to my Chinese bank account.

There are two PayPals available in China: one specifically for international payments, and another that’s only for domestic use. The latter competes with two homegrown payment services, Alipay and TenPay, which dominate the domestic market.

So now, my international transfers go like this:

Chinese bank –> China PayPal –> American PayPal –> Ally Bank.

The first three steps take just minutes. It requires visiting only the two PayPal websites. The first allows me to pull money from my Chinese bank and send it to the American PayPal account. From that site, I can send funds to Ally. There’s usually a delay of 1-2 business days for the deposit to be credited. That’s a little faster than a wire transfer, and the front end is much faster and more convenient than slogging over to my bank branch with a friend.

The cost of the transfers depends on the amount sent. Here’s an example. I pulled 726.67 RMB ($120) to send to American PayPal. PayPal charged me about 4% ($4.98) for the transaction, leaving me with $115.02. I then sent $120 to Ally. So, I spent almost $5 to transmit $120 to my American bank.

Quick and easy. Though some people, including me, grouse about PayPal, for international money transfers, it’s really good.

Bitcoin

Boosters of Bitcoin and its various offshoots say crypto-currencies will eventually dominate the money transfer market. I have my doubts. For the moment, transferring money across national borders is not substantially easier than using PayPal or Western Union. It ‘s cheaper than both, however.

The attitude of China’s banking authorities toward Bitcoin has been somewhat murky since December, but the Bitcoin exchanges in China have worked out a money transfer system that regulators find acceptable.

BTC-China, Huobi and OKCoin have corporate bank accounts into which customers transfer funds from their bank accounts electronically, by ATM or at the teller window. This kind of account-to-account transfer is common in China, and it’s usually free-of-charge.

[In other words, if my buddy in Shanghai needs me to send him money, I don’t need Western Union. I just need his full name and bank account number, and I can deposit money right into his account using online banking.]

BTC-China has an English website, so I will focus on them. The minimum bank transfer at BTC-China is 2,000 RMB — about $330. For smaller amounts, like 100 or 200 RMB, BTC-China offers vouchers you can buy online. I have not used either method yet, but it would go like this.

Chinese bank/voucher purchase –> BTC-China –> Coinbase –> Ally Bank

This would require three websites. Transfer money from my Chinese bank to BTC-China’s account, then log into BTC-China to buy the Bitcoins and send them to Coinbase, the US-based Bitcoin site. Finally, log into Coinbase, convert to dollars and send to Ally. The only fees involved would come at the end: when Coinbase transfers the money to my Ally account, it and Ally together charge about 1-2% of the initial amount.

Yet another way is to use the Ripple network. Ripple currency is similar to Bitcoins, with one major difference. Ripple “coins” never leave the Ripple network. In other words, I can’t store Ripple coins on my computer, as I can Bitcoins.

Ripple uses “gateways,” which are separate exchange sites to convert other currencies, like RMB, into Ripple (XRP). There are several outfits selling Ripple vouchers online in China now. I’ve used one, RippleCN, to buy Bitcoins with RMB.

Today, I bought 0.0389 BTC (about $32) to put in my Coinbase account. The Bitcoin to Bitcoin transmission fees are zero. The only fee charged comes at the end, when Coinbase deposits money into my Ally account. My net deposit was $31.36 and it’s available in four business days.

That’s about 1.5% in fees, less than PayPal, but Coinbase requires a longer wait for final credit to your bank account. (It’s faster if you link a Visa credit card to your Coinbase account, but I don’t have one.)

The drawback was the number of websites required.

  • Taobao.com to buy the Ripple voucher
  • Ripple.com to convert from RMB to XRP and send to Justcoin. com, a Norwegian Ripple gateway
  • Justcoin.com to convert to XRP to Bitcoin and send to Coinbase
  • Coinbase.com to convert to dollars and send to Ally

This kind of website shuffle is hardly going to turn the money transfer market upside down. Maybe the BTC-China bank transfer will be a little easier, but it still would not offer substantial benefits — other than slightly lower fees — over using PayPal, which takes just two website visits and about 10 minutes of my time.

Maybe it will get easier. After all, PayPal had its growing pains early on. It took time for people to get used to the idea of sending money to an email address. Bitcoins are at the same stage now. There are still some kinks to work out. If the Bitcoin system survives, it may just give PayPal and Western Union some needed competition.

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