Don’t overpay when sending an international money transfers.
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.|
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.
What is the mid-market rate?
The mid-market rate is what your money’s actually worth on the global market compared to another currency. It’s the midpoint between worldwide supply and demand for that currency — and the rate banks and transfer services use when they trade among themselves.
Use this rate as a baseline to compare against the rates provided by your bank or transfer service. With it, you’ll discover which companies offer the best rates.
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||1,280 AUD||1,320 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 40 more Australian dollars to her host family — a lot more to help them in preparing for her stay.
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.