As the means to both fund and liquidate your trading account, deposit and withdrawal options should be considered as careful as possible. Here are the 4 key factors to watch for.
Deposit and withdrawal methods are vital aspects to pay attention to, especially for beginners. It deals with how you want to fund your account or withdraw your money. Different methods bear different procedures, fees, and transfer speeds that may influence the amount of deposit and withdrawal that you should apply.
For example, you trade in a forex broker with the lowest deposit of $10 because you want to start small as a beginner. But with the Wire Transfer's fee that amounts to $30 per transaction, it would be unrealistic if you use the payment methods just to deposit a $10 to your account. In this case, choosing other payment methods with smaller fees would be a wiser move. Electronic payments that incur the fee in the percentage of the transfer amount would be a better choice. Let's say the fee is only 3% from the deposit amount, you will be charged only with $3.
On the other hand, what if you are prepared to open an account with a bigger amount of money, and you intend to continuously do so? Say you plan to deposit in the amount of $1,000-$5,000, fees from electronic payment would be a big disadvantage as you can be charged with fees larger than $30. The outcome would be much better if you choose Wire Transfer, as the fee policy is fixed at $30.
Such knowledge may be trivial for some traders, but it is extremely important if you don't want to spend too much money just on the fees of deposit and withdrawal. Instead of wasting it on things that could be avoided with certain considerations, why don't you use the money as additional capital for your trading account and turn them into profits?
If you are interested to learn how to choose the payment methods wisely, here are the four things to consider:
1. The Payment Options
The broker can provide various deposit and withdrawal methods such as classic transfer modes like Western Union, prevalent transfer modes like Wire Transfer and Credit Card, e-payment, and third party deposits. But not all brokers can provide everything because of regulatory limits.
For example, US-based brokers like OANDA and FXCM used to offer payment via Wire Transfer, Credit/Debit Card, and Paypal. But since the regulation changed, they eliminate the Credit Card and Paypal methods. As for European-based brokers, they usually prefer e-payments while also provide Wire Transfer and Credit/Debit Card options. Meanwhile, many offshore brokers provide transfer choices via a third party to speed up the process. With this transfer method, traders from many countries can deposit through local banks so the transaction is free of charge and processed instantly.
Apart from other methods mentioned above, there are also innovative ones such as virtual pre-register cards, cooperation with local companies to receive a direct transfer from local banks, etc. The goal is for the clients to deposit and withdraw their funds more efficiently.
2. The Processing Time
Fund transfer among banks that are located in different countries or even continents is very complicated. More than that, the transfer fee can also be very high. Meanwhile, transactions using Credit/Debit cards are usually subject to high fees by the card issuer, although processing can be done instantly.
That is why brokers always try to provide alternative deposit and withdrawal methods so their clients are not restricted to conventional means like Wire Transfer and Credit/Debit cards. Even so, processing time can vary on what option the trader chooses and how much time is needed for the brokerage company to process their approval upon deposit and withdrawal activities.
Moreover, it's important to learn from other trader's past experiences and mistakes. Some brokers can promise many things but are often different in reality. The quicker and easier the process, the better it will be for you. Therefore, choose a reliable broker that has been proven to put their clients' best interests as their top priority, especially in the matter of deposit and withdrawal process. Normal processing time for bank transfer should be within 3-5 business days, while online methods should take no more than 24 hours. Some electronic payments can even process transactions within minutes.
3. The Fee
Novice traders don't realize that fees are cut twice in the deposit and withdrawal process: by the company that acts as the intermediary and by the broker. In Wire Transfer, the fee deducted by the intermediary can be very high because the funds will pass through several banks before arriving at their destination. Whereas in the third party transfer method, there can be no fee needed because the transfer process can be seen as a transfer of funds from one account to another.
Other alternatives of low fee payment options come from Credit Card and e-payment. As a matter of fact, transactions via e-payments like PayPal, Skrill, and Neteller are known to have relatively low fees as compared with the Wire Transfer.
4. The Amount of Transaction
This aspect is also correlated to the payment method that the trader chooses. Every broker can set a various minimum amount of deposit and withdrawal, with a range from only a few dollars to tens of thousands. This will affect the number of funds that you need to deposit in the beginning and how much profit you will get later once you can withdraw your money.
Therefore, it's important to pay close attention to the minimum amount of deposit that each broker has determined for each payment method. In this case, the Wire Transfer system usually has a higher deposit size and minimum withdrawal than other methods such as Credit/Debit cards, e-payment, and third-party transfers.
To sum up, considering what deposit and withdrawal method needs a thorough consideration as it is a critical aspect of your trading experience. After practicing in a forex demo account, funding a real account is the first step to live trading. The various payment options and different rules that follow each method can sometimes be confusing, especially if you're a new trader. However, you can use the four aspects explained above to pick your ideal deposit and withdrawal option in a forex broker.
Our best recommendation is to prioritize brokers with various payment options, quick and efficient in processing your transaction, sets a relatively low fee, and have minimum deposit and withdrawal amounts that accommodate you. To find it easily, you can follow the guides in the Broker Finder.