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How to compare money transfer fees
Don't overpay when sending an international money transfer.
Transfer fee and the exchange rate are the two most common charges when you need to send money overseas. Save on these fees by comparing banks and transfer services to find which offers the lowest fees and still meets your needs.
How do banks and transfer services make money on transfers?
Banks and independent money transfer services charge fees per transfer. These fees can be a flat transfer fee — for example, $25 per transfer — or a percentage of the total amount you’re sending.
What fees should I look out for?
Depending on your bank or money transfer service, you could pay:
|A||Amendment||Fee for changing the details of your international money transfer.|
|B||Bank-to-bank||A fee for transferring money to a competing bank, much like an ATM fee.|
|C||Cancellation||Charged if you decide to cancel your transfer — the receiving bank can also charge a cancellation fee.|
|D||Disbursement||Sometime call outgoing fees. The recipient’s bank may charge a fee to receive an international money transfer. You can pay this fee upfront to make sure your loved one can get the full amount you intended to send.|
|I||Investigation||This fee is charged if you inquire on the status of the transfer.|
|I||International||For sending or receiving money from an overseas bank account.|
|M||Margin||This is applied to the exchange rate and is often a hidden cost. Cross check the interbank rate against exchange rates published on the international payment service provider’s site to find out the margin.|
|O||Online||Online banks often charge this fee for international money transfers.|
|P||Payment method||A fee based on how you’re paying for the transfer. For instance, some banks charge more if you pay by phone or at a branch (rather than online), and you’ll often pay higher fees if you pay by credit or debit card.|
|R||Receiving||Sometimes called incoming fees for receiving money overseas.|
|T||Transfer amount||A percentage-based fee based on the amount of the transfer.|
International money transfer provider fees
Typically, with a money transfer provider, you will only incur one fee — a transfer fee — and some charge no fee at all. Most providers do not charge the receiving party a fee, and tracking the transfer is also free. The amount of the transfer fee can vary from provider to provider, and depending on the method of transfer — online or at an agent location — and the method of delivery — cash pick-up or bank deposit. But you will likely encounter only one fee. However, don’t neglect to weigh the exchange rate as well when deciding which provider to go with.
Institutions that don’t charge a transfer fee
There are a number of international transfer companies that don’t charge a transfer fee. For example, TorFX makes money by applying a margin to the exchange rate (but it still ends up being significantly cheaper than using your banking institution). Be sure to compare quotes from providers that do and don’t charge a transfer fee. You may find that paying a higher transfer fee leaves you better off at the end of the day because of a more favorable exchange rate.
Institutions that charge a low margin on the exchange rate
If you want to get the best deal you can, it’s a good idea to compare non-bank international money transfer providers. Peer-2-peer (P2P) international money transfer companies can give you an exchange rate that is just a touch above the market foreign exchange rate. While it’s difficult to get the market rate if you’re an everyday consumer, these P2P companies can give you access to some of the best foreign exchange rates around.
Pay attention to the fees when you send money overseas. Although some of them can’t be avoided, others can, and there’s no reason why you shouldn’t shop around to find the best deal when sending money overseas. And don’t forget to take the exchange rate into consideration when determining which provider to use. A company that doesn’t charge a transfer fee might make up for this by offering a poor exchange rate.
How can I compare money transfer fees?
How much you’ll pay for a money transfer depends on factors like:
- If you’re sending or receiving money. With a bank, incoming transfers tend to be cheaper than outgoing transfers, for which the sender bears the brunt of costs.
- How you’ll send the money. Find out if the company you want to use charged to make transfers with a credit or debit card or if you have to pay to make transfers over the phone.
- The frequency you need to send money. By scheduling more regular payments, you can often save a few dollars.
- The exchange rate. Banks aren’t always forthcoming about the margin they add to the mid-market rate. Confirm the rate you’ll receive before handing over your cash.
- The amount you send. Some online money transfer services will waive their fees for larger transfer amounts of $1,000 or more.
In general, you’ll pay more for an international wire transfer through your bank than if you use an independent money transfer service like TransferWise, which offers stronger exchange rates and lower transfer fees.
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Compare fees between money transfer services
Case study: Sending $1,000 to Australia
Lilli needs to send $1,000 to her host family in Sydney ahead of studying abroad. While she’s comfortable with the security and familiarity of her local Bank of America, where she holds an account, she decides to compare its rates and fees against a popular online money transfer service.
Here’s a breakdown of what Jessica could pay to transfer $1,000 to Australia:
|Bank of America||Online money transfer service|
|Transfer fee||$35 (outgoing international fee)||$5|
|Exchange rate||1 USD = 1.28 AUD||1 USD = 1.32 AUD|
|Transfer method||Online deposit||Online deposit|
|Transfer speed||1–2 days||1–2 days|
|Total AUD received||1,235 AUD||1,313 AUD|
Jessica’s learns that her bank not only charges an outrageously high transfer fee but also offers a weaker exchange rate. By going with a money transfer service like OFX or TransferWise, Jessica could save $30 in fees and send 78 more Australian dollars to her host family — a lot more to help them in preparing for her stay.
Do smaller money transfers incur lower fees?
Smaller transfers don’t mean lower fees. But you do have options when sending $100 or less.
You’ve seen ads for providers offering low or no fees on international money transfers. Those ads don’t tell you that you often need to send $5,000 or more to get such low fees. But what if you need to send only $100 in spending money to your grandchild in the UK or a $50 gift to a friend in Mexico? You might expect that such a transaction would attract a smaller fee than sending, say, $2,500.
Unfortunately, your local bank and time-tested providers like Western Union could charge you $35 or more to wire the money — a significant chunk out of such a small amount. However, companies like TransferWise, Xoom and Ria are undercutting the competition to earn your business with better deals. Even if you’re looking to send only $100.
The next time you need to send money to friends, family or businesses overseas, you’ll likely pay a transfer fee and a margin on the exchange rate.
But by comparing your options, you can be sure you’re getting the best deal for your situation.
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