Transferring Large Amounts of Money Around the World… How to Avoid Massive Hidden Fees

Time Doctor - Transferring Large Amounts of Money around the World

Summary:

There are ways to make moving large sums of money less of a hassle. If you wish to, you can use the cheapest options available, such as TransferWise. You can also check out the estimated hidden fees of major banks in the US, UK and Canada.

Nowadays, sending money overseas is a common practice – people work with clients from across the world and money transfers have become a necessity. Using bank services is the first option that springs to mind when it comes to money transfers. Although all banks have their own policies for money transfers, one thing is always the same – charges that you have to pay for a wire transfer. In addition to that, banks may also charge you with hidden fees that occur in the form of unfavorable currency exchange rates.

It can get tricky but is there anything you can do about it? The following tips will teach you how to send money abroad and which aspects of the service to pay the most attention to.

International Monetary Transfer Hidden Fees

Unfavorable exchange rate is the major reason for differences between declared and real fees that you pay to a bank for sending money abroad. Every bank has its own exchange rate fee that applies when you transfer money from one currency to another. You have to pay attention to the bank’s exchange rates and their currency conversion fee.

Depending on the currency, banks can charge a very high hidden fee. Have a look at Table 1 to learn how much it would cost you to send 100,000 Australian dollars to the US if you use the services of a few Australian banks.

Table 1: Hidden currency conversion fees when transferring $100,000 from Australia to the US, or from the US to Australia (assuming that the Australian bank is doing the currency conversion)

Stated fees Hidden fees (estimate)
ANZ $15 $4,400
NAB $15 $5,400
St. George $15 $6,005
Westpac $12 $3,948
Commonwealth $11 $5,591

It doesn’t cost a bank $4,000 to send $100k overseas and transfer the money. The banks are taking advantage of the fact that you, the customer, doesn’t see this fee. The fee is not declared, so the customer does not pay attention to it and think it’s somehow a normal or legitimate cost of transferring money.

Australian banks are particularly aggressive in charging hidden fees. If you transfer money from the US to Canada the fees are going to be a lot more reasonable. In some cases, as low as 1% but still for most transfers the fees are 2.5% and for more exotic currencies the fees are often a lot higher.

Let’s look at how you can reduce these hidden fees and save money when transferring around the world.

Internet financial technology companies are now offering a much better alternative

There are a number of companies cropping up that are providing a lower cost alternative to using the banks. The main ones that we suggest for large transfers are: CurrencyFair, TransferWise and OFX (previously OzForex).

Let’s compare these three options:

OFX (previously OzForex), OFX (previously USForex), UKForex – This is the same company with several different brands. They are more focused on large transfers and they cut their currency fee as you transfer a larger amounts. It varies from a 1% fee for lower transfer amounts to 0.4% for larger amounts.

TransferWise– is a new kind of financial company that specialises in smaller transactions for which you pay a low, upfront fee between 0.5% and 2%, depending on the route. Their system is based on local bank account transfers, which makes them much cheaper compared to other providers and banks.

CurrencyFair – This is a bit different to the other options as it also has a marketplace where you can directly exchange with other participants. This allows you in theory to achieve the market exchange rate or perhaps even better if you have the patience to wait and exchange money. They also have a fast option which is a 0.5% fee.

Table 2: Comparsion of OFX (previously OzForex), TransferWise and CurrencyFair

Company Exchange fee to send $100k Countries you can send money from Countries you can send money to
OFX (previously OzForex),
OFX (previously USForex) and
UKForex
$400 South Africa, Australia, Canada, Denmark, Western Europe, Hong Kong, Japan, Mexico, New Zealand, Norway, Poland, Singapore, Sweden, Switzerland, Thailand, UAE, UK, USA, South Africa, West Africa, Australia, Brunei, Canada, China, Czech Republic, Denmark, Western Europe, Fiji, French Overseas Collectivities, UK, Hong Kong, Hungary, India, Indonesia, Israel, Japan, South Korea, Kuwait, Madagascar, Malaysia, Mexico, Morocco, New Zealand, Norway, Oman, Pakistan, Papua New Guinea, Peru, Philippines, Poland, Samoa, Saudi Arabia, Seychelles Singapore, Sri Lanka, Solomon Islands, Sweden, Switzerland, Taiwan, Thailand, Tonga, Turkey, UAE, USA, Vanuatu, Vietnam
TransferWise $500-$1000 Australia, Bulgaria, Czech Republic, Denmark, Western Europe, Hungary, Norway, Poland, Romania, Sweden, Switzerland,
UK, USA,
South Africa, Australia, Brazil, Bulgaria, Canada, Chile, Czech Republic, Denmark, Western Europe, Georgia, Hong Kong, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Philippines, Poland, Romania, Switzerland, Sweden, Singapore, Thailand, Turkey, UAE, UK, Ukraine, USA
CurrencyFair $460 South Africa, Australia, Canada, Czech Republic, Denmark, Western Europe, Hungary,Norway, New Zealand, Poland, Sweden, Switzerland, UAE, UK South Africa, Australia, Canada, Czech Republic, Denmark, Western Europe, Hong Kong, Hungary, Israel, New Zealand, Norway, Poland, Sweden, Switzerland, UAE, UK, USA,

Using a brokerage account to almost completely eliminate currency exchange fees

It is possible in some cases to use a brokerage account to exchange foreign exchange and withdraw the money you exchanged in another currency.

In theory this can give you very close to inter-bank rates. It’s possible to do this for example with Interactivebrokers. You can deposit money in US dollars then trade it on the platform and then withdraw in Canadian dollars, Swiss Franc, Euro, British Pounds, Yen, New Zealand dollars and more.

There are some limitations for each currency. For example it’s not possible to deposit money in Australian dollars and then to withdraw in US dollars; however, it is possible to go in the opposite direction from US to Australian.

Note that this option of using a brokerage account is not what the account is intended for! It’s intended for trading, so it might not be the type of use the brokerage company is particularly happy with. Also it’s complicated to set up a trading environment and it also only works for you to transfer between two accounts that you own personally (you can’t transfer the money to someone else).

So this option is probably something that you do not want to consider unless you are consistently transferring very large amounts of money.

Non traditional banking arrangements (you probably can’t get this unless you have $10 million in the bank)

There are other non-traditional banking arrangements where you can get access to inter-bank rates. Multi-national companies for example do not have to go through the measures mentioned in this article.

Transferring money between two US dollar accounts in different countries

If you transfer for example between a US dollar account in the US and a US dollar account in the Philippines then you can transfer money between these with a wire transfer (with no hidden fees as there is no currency exchange) and then you can sometimes exchange money within the same bank without hidden exchange fees, but this depends on the individual bank and country. This also works for two Euro accounts in different countries in Europe for example.

In this case there are no hidden currency conversion fees, but you might be interested in reducing the stated fees for the wire. These can be very high so if you are doing a lot of wires then there are some US bank account options with discounted wire fees:

Table 3: Reducing the cost of wire fees in the US (this is for stated fees, not hidden fees)

Company Lowest cost arrangement for businesses on a per-wire cost basis (for international wires) Requirements for this account with lower cost international wires
Chase $40 $5 less when transfer is made through Chase.com
Citibank $35 $10 discount on all outgoing wire transfers made online.
Wells Fargo $35 $5 discount if you set up repetitive wire transfer

More conventional money transfer organizations

These often have lower fees than the banks, although it depends on the amount and currency. Examples are: Western Union, Ria Money Transfer, MoneyGram. These are not options for transferring large amounts of money.

PayPal – this is a convenient option but it is very expensive for exchanging currencies. They have a standard currency exchange fee of 2.5%. This is also a risky option to transfer a large amount as PayPal can and does freeze accounts.

Bitcoin – it’s very topical and has some good potential but it’s not really a practical option to transfer money between most currencies. There is also a large spread in exchanging between most currencies and Bitcoin, so the cost to transfer is high in the vast majority of cases.

Other money transfer companies – there are a number of other money transfer companies you can consider. In most cases they are set up for smaller transfer amounts, some examples are: WorldRemit, Tranzfers, Paysera, Xoom, Skrill, Payoneer

Options for specific currencies – Some currencies have specific options that you might want to consider that are really better options for that specific currency. We have created a number of money transfer articles for various countries which you can review here (but note that these are more focussed on transferring smaller amounts of money): Australia, Bangladesh, Bolivia, Brazil, Colombia, Egypt, India, Indonesia, Kenya, Macedonia, Mexico, Pakistan, Philippines, Poland, Romania, Serbia, Ukraine

What if you are looking to transfer to and from a currency not mentioned in this article (no solution is mentioned here)?

Let us know in the comments and we will research and post some potential solutions for that currency.

In the last section of the article we’ve created some tables with estimated fees for a wire transfer and currency exchange of $100,000.

Table 4: Estimated hidden fees with major banks in the US when transferring $100,000

Bank name Stated fees (USD) USD to CAD HIDDEN fees USD to EUR HIDDEN fees USD to GBP HIDDEN fees
Wells Fargo $40 $3,686 $4,755 $3,975
Bank of America $45 $4,789 $5,035 $4,711
U.S. Bank $50 $6,803 $6,649 $6,634

Table 5: Estimated hidden fees with major banks in the UK when transferring 100,000 GBP

Bank name Stated fees (pounds) GBP to USD HIDDEN fees GBP to EUR HIDDEN fees GBP to AUD HIDDEN fees
Barclays £25 £98 £465 £477
HSBC £8 £124 £515 £528
Royal Bank of Scotland £9.50 £4,046 £4,728 £4,280

Table 6: Estimated hidden fees with major banks in Canada when transferring $100,000 Canadian dollars

Bank name Stated fees (CAD) CAD to USD HIDDEN fees CAD to EUR HIDDEN fees CAD to GBP HIDDEN fees
Royal Bank of Canada $13.50 $2,660 $3,696 $3,159
Toronto-Dominion Bank $12.95 $2,638 $2,775 $2,575
Bank of Nova Scotia $10 $2,675 $3,850 $3,024
Bank of Montreal $10 $2,187 $3,821 $2,958

Notes regarding this article:

  • Several of the links are affiliate links where we make money if you click on the link and use the service. You can avoid this if you wish by not clicking on the links and instead directly searching their name in Google. We have included several options where we do not have an affiliate link.
  • The hidden fees are estimates. We have estimated them based on the banks declaration of their currency conversion rate and the current daily exchange rate. It’s not 100% accurate because the currency varies throughout the day, but most banks have a way of calculating the rate such as: Rate we give the customer equals the real rate minus our margin of 2.5%. So if you compare the estimates on a day to day basis for each bank, the fee they are taking is pretty consistent.

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