By Luis Aureliano.
According to NerdWallet analysis, the total international money transfers from immigrants in the US to foreign countries amounted to $135 billion in 2015. That figure includes substantial fees and commissions paid to banks and other companies processing these foreign exchange transactions. However, senders have quickly cottoned on to the extortionary fees being levied upon them, and they are opting for alternative means of sending money abroad. The costs of sending international wire transfers through banks is significantly higher than other options.
The default go-to option for many senders was the international wire transfer, however this is also one of the most expensive ways of processing an international foreign currency transfer. On average, and international wire can cost around $40 and it covers the transfer of funds from one bank/financial institution to another one. Additionally, the receiver of the funds may also be required to pay a nominal fee. There are several ways to save money with these international currency transfers, notably by conducting the transfer online as opposed to being physically present at a bank.
Compare FX Transfer Providers for the Best Deals
It is also a well-known fact that banks tack on additional fees to the exchange rate – over and above what the prevailing rate is. This means it is unfavorable to senders, regardless of the bank being used. It is far more beneficial to consider the services of non-bank providers such as OFX as they offer superior exchange rates to banks. Most of the time, banks offer one another affordable exchange rates with currency transfers between banks, but with customers it’s a different story. There are many other aspects to consider when transferring money abroad, notably the money transfer method, and the speed at which it will be transferred. It is important for clients to understand the network size of the provider in question. The larger the international network, the more likely it is the company will transfer the funds quickly, cheaply and efficiently. In this vein, it’s important to conduct reviews of service providers.
For example, an OFX service review finds that this is one of the most reputable foreign exchange service providers in the United States. The company operated in Australia under its flagship brand OzForex. It was also running separate brands for each of its geographic hubs such as the United Kingdom (UKForex), New Zealand (NZForex), Canada (CanadianForex) and the US (USForex). OzForex is a large publicly listed company that trades on the Australian Securities Exchange (ASX) under the ticker OFX. Now, this internationally accredited foreign-exchange services provider is consolidating all of its major subsidiaries (USForex and UK Forex) as part of OFX.com. This will internationalize the brand and provide single platform access to clients the world over. As an investment option, this is likely to boost the sticker price for OFX, and further bolster the brand.
There is a myriad of costs, some seen and some unseen, when transferring money abroad. In any event, clients are entitled to know all the costs upfront before any money is transferred. According to the Consumer Financial Protection Bureau (CFPB), all financial companies including credit unions, banks and remittance transfer providers must provide all the necessary information to clients before a transfer is conducted. These fees include commissions, fees charged during the process of money transfers, taxes, exchange rates, and the precise amount that the receiver will get. According to industry experts, there are many hidden fees that clients are blithely unaware of. These include widely ranging wire transfer fees which can be as high as 0.5% – 3.9% when a credit card or debit card is used. That’s why it’s important to research the method of funds transfers and the cost associated with them.
Other fees to look out for include charges levied on recipients of funds. International wire transfers often come with a hidden sticker price of $15 – $30 for the recipient. One way to avoid this is by using a foreign-exchange services provider that has banks in the sender country and the receiver country. That way once the money is deposited on one end, the requisite figure can be withdrawn on the other end with no actual need to transfer the funds. The last fee to watch out for is the margin on the exchange rate. Many of the world’s biggest banks can charge as much as 5% on transfer amounts. A figure of $20,000 may be subject to $1,000 in the exchange rate fee, however providers like OFX do not levy this fee on clients.
Luis Aureliano is a business writer and financial analyst. With over 15 years of experience in global finance and an MBA in economics and management, Luis’s areas of expertise include business, marketing, communications, personal finance, macro economics, stocks and emerging markets.
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