Undoubtedly, digitization in the banking sector has provided us an opportunity to send as well as receive money from around the globe safely and quickly. However, if you feel these transfers are free of cost, you are mistaken. Even today, there are hidden charges and fees that plague almost all the means of international transfers.
Yes, what you send is not always what they receive. Therefore, it is always good to remedy the charges using international money transfer specialists such as moneytransfercomparison.com. Let us first take a look at what these hidden charges look like and how much money we can save in the process.
Hidden costs involved in International Money Transfer
International transfers require verification and checks on various factors such as frauds, anti-money laundering, intermediary banks, receiving banks and so on, and finally after clearing all these checks only the amount gets transferred to the recipient’s account.
At each step of the process, there is cost involved which is paid by the customer, as hidden cost, and in case the amount is requested to be transferred the same day, they end up paying speeding fees. Next comes the unfavorable foreign exchange rates, which is one of the major reasons for differences between the mentioned and actual fees, which you might pay for sending the money to another country. Different banks and money transfer services use different currency exchange rates for their transactions.
These exchange rates swell up the overall cost of international payments as it includes markups. According to researchers and studies, the majority of the revenue earned by banks from money transfer services is from currency exchange rate. Therefore, when you make a transfer, the bank applies its own exchange rate, which is not just the conversion fee but also the interbank transfer rate.
Another comes the fees included by the service provider. International transfer providers vary their fees based on competition and location. One can expect exchange and receiving fees based on how much you are sending and to which location. While some providers even waive off the transaction fees, there are some who offer a lower exchange rate.
For instance, PayPal offers two payment methods for international money transfers, each has its own fee structure associated with it. When sending directly to another PayPal account, the platform charges 5% of the transaction with a fee that can be anywhere between $0.99 – $4.99. If the transfer is funded by debit or credit card, there is an additional funding fee of 2.9%. Amazon, on the other hand, collects a cross-border processing fee and an authorization fee along with the taxes.
It is hard to beat the convenience of payment gateways like Amazon and PayPal because of global popularity although there are a number of options available. Therefore, one must check for factors like transfer frequency, currency conversion, location, amount as all these can greatly impact the cost of transferring money. Also, there are a lot of companies that are offering a lower cost option for large international transfers, such as Wise, OFX and CurrencyFair.
Wise is a new player in international money transfers that specializes in small transactions, that is made available for a low, upfront fee between 0.5% – 2%. They are based on local bank account transfers, because of which they are much cheaper as compared to other providers and banks. OFX, on the other hand, is more emphasized on large transactions.
They cut down the transaction fees with the amount, and it varies from a 1% fee to 0.4% fees for larger amounts. CurrencyFair is different from other players and it also has its own marketplace where the amount can be directly exchanged with other parties. This offers a better exchange rate.
Another option available is that of a brokerage account, which involves using a brokerage account to exchange foreign exchange and withdrawing the money in another currency. However, these types of accounts have certain limitations associated with them. For instance, it is not possible to deposit Australian dollars and withdraw US dollars, but doing it the other way round is possible.
You can also opt to use services of a specialist currency provider as they generally offer much better exchange rates compared to a bank. They can pay faster, at lower fees and provide great customer experience. However, finding out which money transfer service is the cheapest for your requirements is a task as it depends on a lot of things.
Ways to save money on hidden transaction fees
Here are some of the tips that can guide you in making an informed decision to save money as well as time with the international transfer process.
- Compare various money transfer services and platforms and see what works out to be the best and most effective for your specific needs. It wouldn’t take more than a couple of minutes as most of the information is available online these days. Compare to find the best exchange rates, most reliable service, transfer fees and other transaction costs.
- It is always better to send a single, large amount rather than doing multiple transfers of smaller amounts. This is because each transaction would be associated with transfer fees, adding up each time to the total amount you pay for the transfer.
- Consider sending large amounts through foreign exchange companies that provide better fees and exchange rates.
- Always be aware of the transfer limits as the transfer fees you pay usually depends on the amount you wish to send, not forgetting other factors such as location, duration and so on.
- Always keep an eye on the fluctuations or indicative rates as the foreign exchange market is quite unpredictable. It never sleeps. Exchange rates change every second, which might significantly plummet your transaction amount in a short span of time. being aware of the rates can save you some dollars in the process.
- Be mindful and aware of the total cost as the incurred fee shown to you could be low, but the exchange rate might be high. Higher fee is not an issue if the exchange rate is good. So, take time to compare the final amount your receipt gets after the complete transaction.
- Always remember to ask and be well informed about the process, liabilities and alternate options in case your funds are not transferred by specified time and date.
Reap the benefits of a multi-currency account
Multi-currency accounts let you hold multiple currencies in one account. It could be via wire transfer, debit card, cheque or ACH. They enable you to send or receive money from other countries at foreign exchange rate that are promising. Also, multi-currency account holders face comparatively lesser risk when it comes to rate spread, which is because of the differences between incoming and outgoing transactions.
This is mainly because these accounts help enterprises to send and receive payments in local and foreign currency without the need of conversion. One can switch between multiple currencies, saving on conversion fees. Even the bank opening process is comparatively simpler as one doesn’t need to get the currency exchanged at the time of onboarding.