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A $1,000 money transfer journey

How much money will my recipient receive?

When you send an international money transfer, your loved one will never receive the full amount that you send – from fees to the exchange rate, your transfer will incur losses along the way (and your service provider will profit). Depending on the method you choose to transfer, the amount your recipient could receive can vary.

Basically – all transfer methods are not created equal. Let’s compare three options for sending money and see how each differs.

Where will I lose money?

You’re at risk of losing money in two main steps:

  1. The transaction fee to send your money.
  2. The transfer service’s exchange rate.

These are the two areas where the vast majority of money transfer services will take money from you. You may encounter other fees, but they’re not universal.

Calculations

Bank transfer

    • Start with $1,000.
    • An outgoing international wire transfer costs $40.
      • $1,000 – $50 = $960
    • There’s a 4% spread between the mid-market rate and the bank’s exchange rate, so we lose $38.
      • $960 x 0.04 = $38.40 (We’ll round to $38.)
      • $960 – $38 = $922
    • There’s a receiving fee of $20 that your recipient’s bank will charge when they accept your money into their bank account.
      • $922 – $20 = $902
  • Your recipient gets $902.
  • Total loss = $98

Foreign money transfer service

    • Start with $1,000.
    • The transfer fee is $5.
      • $1,000 – $5 = $995
    • There’s a 0.5% spread between the mid-market rate and the FMT service rate, so we lose $5.
      • $995 * 0.005 = $4.975 (We’ll round to $5.)
      • $995 – $5 = $990
  • Your recipient gets $990.
  • Total loss = $10

Cash transfer

    • Start with $1,000.
    • The fee for an in-person transfer is $7.
      • $1,000 – $7 = $993
    • There’s a 3% spread between the mid-market rate and the cash-transfer service exchange rate, so we lose $30.
      • $993 x 0.03 = $29.79 → Round to $30
      • $993 – $30 = $963
  • Your recipient gets $963.
  • Total loss = $37

Bottom line

As you can see, Option 2, or independent money transfer service, takes a mere $10 out of the transaction, compared to $37 with a cash pickup service and a whopping $98 from a bank-to-bank transfer.

Other fees

Will the receiving bank always assess a fee?

This depends on the bank you’re sending money to. US banks typically charge for receiving international transfers — often $15 to $30. In some countries, such as France, many multinational chains don’t charge receiving fees, while smaller banks may.

Ultimately, you’ll want to contact your recipient’s bank and ask about receiving fees.

Will I have to pay any other fees?

Your bank may not have a direct relationship with the bank you’re transferring money to. In that case, you could pay intermediary fees when your money is sent through other banks. Contact your bank to find out if you’ll need to pay intermediary fees.

Are there account opening fees?

You won’t typically see account opening fees with a money transfer service, cash transfer services or bank. However, a bank may require a minimum deposit or charge a monthly fee if your account has less than a certain amount.

For example:

  • Bank of America requires a $300 minimum daily balance; otherwise, it charges a $5 monthly fee.
  • Chase requires a $300 minimum daily balance; otherwise, it charges a $5 monthly fee.
  • Wells Fargo requires both a $25 minimum opening deposit and a $300 minimum daily balance; otherwise, it charges a $5 monthly fee.

As with any service, take the time to compare all of your options before choosing one that is right for your needs.

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