What travelers need to know before transferring money

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More travelers than ever are sending money to vacation rental owners, tour operators and each other.

It doesn’t always work.

Jermaine Amado, a Denver-based photographer, recently booked a tour for a Colombia excursion. The tour operator has agreed to accept a money transfer from PayPal.

When he initiated the transfer, PayPal blocked him. It turns out that Colombian accounts were restricted – according to locals, for fear of money laundering. “I couldn’t make the excursion,” he says.

This is the first lesson on traveling and sending money: certain restrictions apply.

I had trouble using PayPal in Qatar and the United Arab Emirates. And on a recent trip to Turkey, I discovered that I couldn’t use PayPal at all.

Today more than ever, the transfer of money is full of pitfalls. Consider the recent issues with Zelle scams. Criminals routinely trick travelers through the peer-to-peer payment app. A class action lawsuit against Bank of America claims the financial institution downplayed a “huge” security risk from linking Zelle to its customers’ bank accounts. And the Consumer Financial Protection Bureau (CFPB) is set to issue new guidelines that would require banks to reverse fraudulent transfers made through Zelle.

Strictly speaking, transferring money is sending money from one bank account to another via Swift or Fedwire. But most consumers have embraced a much broader definition of money transfer, including services like Zelle and PayPal. According to experts, there are things you need to know beforehand, whether you’re going to send a wire transfer through your bank or use an app like Zelle or PayPal.

When do travelers transfer money?

Many travelers use wire transfers to send money overseas. Indeed, more and more companies are increasing the price of their products to cover credit card charges. In places like Africa, this could add 5-6% to the cost of a tour. Edward Lyimo, the owner of luxury African safari travel company Pristine Trails Adventures & Safaris, is offering a wire transfer payment option for customers.

“We often have many customers who choose this option when booking their East African adventure,” he says.

But there is paperwork involved. For a traditional wire transfer, travelers must have specific account information with the travel provider. The information should include, among other things, the recipients’ account number, account name, a SWIFT code or IBAN number and the physical address of the tour operator. It’s not as simple as paying by credit card.

Kari DePhillips says the fastest and cheapest way for her to send money is through Wise (formerly TransferWise). “However, funds sent through this method don’t give you the same level of protection as other services,” says DePhillips, who runs a digital marketing agency. In other words, it’s like giving someone money. Once it’s gone, it may be impossible to get it back.

What can go wrong when you send money?

Esther Kiss, who runs a marketing agency in Palm City, Florida, says traditional wire transfers are expensive. His bank charged him $45 for a recent international wire transfer. (These charges are almost entirely unwarranted, since the cost to the bank of sending money is almost zero.)

“Unlike credit card transactions, it’s not easy to get your money back if something goes wrong,” she says. “I speak from personal experience.”

Kiss recently sent money from his Wells Fargo account to a bank in Hungary. The company did not accept a credit card or PayPal, so a wire transfer was the only choice. Wells Fargo quickly debited his account.

“Two weeks later, the company emailed me asking where the payment was,” she recalls. “I showed them the confirmation I got from Wells Fargo. But it turns out they never received it. Their bank insisted the transfer hadn’t been initiated, and the mine had already debited my account.”

So what happened? It turns out that an intermediary bank that had worked with Wells Fargo had the money.

“Yet this intermediary bank refused to release or return the funds,” she says. “It took several more phone calls and discussions with Wells Fargo customer service to get my money and transaction fees credited to me.”

She ended up sending the money via PayPal to a friend in Hungary, who made the payment.

What you need to know before transferring money

Experts say that while wiring or transferring money is safe, you need to know who the recipient is. “It’s important to know exactly where the money is going,” says Chuck Czajka, founder of Macro Money Concepts in Stuart, Florida. “There are a lot of scammers out there, and unfortunately they have been using wire transfers to scam people out of their money.”

No kidding. I almost fell for the PayPal invoice scam recently. And a few years ago, my advocacy organization had an epidemic of scams on vacation rental websites. Criminals would publish fake lists that seemed too good to be true. When travelers tried to book through the secure platform, the scammers offered an even bigger discount if they transferred the money. Many have done so, sending thousands of dollars for fake vacation rentals.

Today’s money transfer scams have moved to Facebook, where scammers offer non-existent products that consumers pay for with wire transfer.

How do you make sure you’re dealing with someone trustworthy? Make sure you know the person.

“This fraud can be avoided entirely by refusing to make wire transfers with strangers,” says Gates Little, who runs a financial services company. “If you have a history with the owner of the property and you believe they are trustworthy, it will involve less risk.”

But he warns that you’re still not protected if something goes wrong with the booking, whether you trust the person or not.

“If someone asks you to book outside of the app to avoid fees or because they’re in a rush, you should be suspicious,” he says. “Fees on platforms like Airbnb are a much easier pill to swallow than your entire vacation fund disappearing irreversibly.”

How to protect yourself when sending money

Chiranth Nataraj, CEO of travel insurance company VisitorGuard.com, recalls how one of his clients transferred a rent payment to a vacation rental a few years ago.

“Our client was unable to collect the money from his bank, despite providing full details of the beneficiary’s bank account number to the bank’s fraud department,” he recalls.

Unfortunately, travel insurance does not cover any of these fraudulent transfers, he says.

But you’re not out of options.

A little-known rule called Regulation E protects US consumers from fraudulent money transfers. It defines an unauthorized electronic funds transfer as a transfer from an account initiated by a person not authorized to initiate the transfer and from which you receive no benefit. A dispute process works much like a credit card chargeback. Contact your bank to initiate a dispute under Regulation E.

If that doesn’t work, you can file a complaint with the Consumer Financial Protection Bureau.

Banks are only beginning to understand their responsibility to help customers under Regulation E. Until then, Nataraj recommends paying by credit card. The credit card dispute process is much more established.

Sending money by traditional bank transfer or through an app like PayPal, Venmo or Zelle is becoming more common for travelers. And with credit card fees rising and merchants looking for an easy way to cut costs, money transfers are only going to become more common in the future.

So there are risks with money transfers, but if you take some basic precautions, you are less likely to lose money. Also, some rules can help you get your money back. Make sure you know them before you hit the button on your next money transfer.

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