The ultimate guide to paying overseas vendors

Evan Dunn
4 minutes
The ultimate guide to paying overseas vendors
In this article

Securing business with international vendors and suppliers from the United States is easier than ever before with the technology we have today. Even if you don’t know the language, helpful tools such as Google Translate can help facilitate communication. The only thing that might slow you down is the process of paying your international partners.

Everyone wants a quick, reliable, cost-effective, and secure method of making and receiving overseas payments. A delayed payment could mean potential fees, and before you know it, a happy business relationship can get derailed.

Our ultimate guide to paying overseas vendors from the US can help you alleviate delays and worries when it comes to international transactions.

Come to an agreement on currency

The first step in paying an international vendor is to come to an agreement on the transaction’s currency. In most cases, the supplier or vendor’s preferred currency will be outlined on the invoice. However, in certain cases both parties might need to choose a currency different than their own.

There are benefits to making payments in your vendor’s local currency. Funds will need to be converted if you pay your international vendor in US dollars, which could cause delays in the transaction due to bank processes. 

Exchange rates can also impact your invoice if you’re counting on converting US dollars to international currency. Because of this, many international vendors raise their quote to offset fluctuating exchange rates. You could end up paying more for goods and services.

If you decide to pay in your vendor’s local currency, you can avoid conversion fees and save yourself unnecessary money and time that can be put toward more important things, like running your business.

What to look for in an international payment provider

Before settling on an international payment method, compare and contrast their criteria to make the right decision for your business.

Consider the following:

  • Fees

  • Foreign exchange rates

  • Available currencies

  • Recurring or one-time payment options

  • Payment processing speed

  • Automation capabilities

Remember — don’t rush to make a decision. Consider what is going to work best for you and your business in the long run.

Choose an international payment option

A good business should have streamlined operations that run like clockwork, especially when dealing with overseas business relationships. Here are some of the most popular international payment options so you can understand what is involved with each.

Bank transfer

Bank transfers are one of the most common payment methods for international transactions. The transaction is run through the SWIFT network. All you need to know is your vendor or supplier’s bank details to send the money. 

These transfers take a great deal of time, and offer very little protection for both merchants and suppliers. If something goes wrong during the process, there’s little you can do.

Bank transfers overseas are usually very slow as well, sometimes taking over a week to go through.

Another con to consider is the high transaction fees for international bank transfers. Per transaction, you can expect to pay anywhere from $6 to $30, and sometimes even more. Fees are also occasionally charged if you want to amend, cancel, or investigate any issues with your transfer.

This is on top of the FX rate that banks offer, which can be 4% to 5% less the interbank FX rate (the rate you typically find on Google). 

Although credit unions offer the option to send international payments and can charge less, they still come with their own fees and limitations.

With all of this information, you might want to reconsider your choice to send an international bank transfer.

PayPal or credit card

One straightforward method for facilitating an overseas transfer is to use PayPal. This works especially well for smaller payments. PayPal provides a cohesive dispute resolution process, secure technology, and protection against fraudulent activity.

PayPal comes with its own set of fees, however. They charge both a percentage fee and a flat dollar fee per payment, based on the amount of money you’re transferring. This international business transaction fee is typically 3% unless the transaction falls into one of these categories:

  • Paying for goods/services in a different currency than what they’re being sold in

  • Sending money to someone when they receive a different currency than what you sent

  • Sending money using PaPal Payouts when the recipient receives a different currency than what you sent

These types of transactions incur a slightly higher conversion fee, at 4%.

Also, when paying via PayPal, you run the risk of account holds, declined payments (based on their perceived level of risk), laborious payment times, and even payment cancellation.

While your credit card can be a suitable method for instant payment, you will be charged a high foreign transaction fee (typically 3%) on each payment.

Peer-to-peer currency transfer

Another method of payment is the peer-to-peer currency transfer. This method is becoming more and more popular, but how does it measure up?

These platforms offer quick payments and charge fewer fees, but they might not be as secure as other forms of international transfers. Peer-to-peer currency transfers also tend to have poor exchange rates and can take a long time for payments to clear.

Airwallex

If you are making international payments and want a cost-effective, fast, and secure way to send money, Airwallex is a great option.

Some of the advantages of using Airwallex are:

  • Our lightning-fast payment system means you can pay international suppliers practically instantaneously. No waiting around for money to clear, no delays. 

  • We offer you access to the interbank FX rate with a very small and transparent margin on top. This means we are up to 90% cheaper than the big banks. Best of all, the margin is the same regardless of the amount you are paying, so there’s no need to negotiate the best rates.

  • We also offer card payment options with zero international transaction fees. If you need to make a card payment, instantly spin up a virtual card to pay a supplier online. 

  • Lastly, we have no monthly fees and you can set up your account completely online.

With access to over 130 countries and 20+ currencies, Airwallex is the safest and most cost-effective way to pay your overseas suppliers, too. We are PCI-compliant so your data and funds remain protected at every step of your transfer. Our security systems maintain the highest international standards.

Gather the right information

Once you’ve decided on an international payment method, you’re going to want to ensure you have the right information on hand. It will be necessary to have various details from the international business or organization that you want to pay before you can process an international payment. 

You might need the following information depending on your payment method:

  • Account holder full name

  • Account holder or business address

  • Account e-mail address

  • Bank account number

  • Branch number and full address

  • SWIFT code/BIC/IBAN code

  • Routing number

Tax considerations

Tax reporting is necessary if you are a US company paying international contractors. 

Your business can report the amount paid to the IRS using Form 1042 and 1042-S. For more information on international business tax compliance guidelines, check out the IRS’s webpage and accompanying links.

The best way to pay overseas suppliers is with Airwallex

For complete certainty, absolute speed, and the best exchange rates around, Airwallex is the safest way to pay your overseas suppliers.

It’s easy to set up, easy to get started, and you gain direct access to our expert support team to help you get the most out of your new payment system.

Sign up now to experience first-hand how Airwallex can streamline your international payments.

Related article: 15 signs you should switch to an online business account

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Evan Dunn
Growth Marketing Lead, US

Evan Dunn manages the growth of Airwallex's SMB business in the US through marketing avenues. Evan is a generalist with expertise in SEO, paid media, content marketing, performance marketing and social selling. He also enjoys slam poetry and waffle making.

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