The cost of transferring money internationally can be daunting. There are hundreds of different options for transferring money...
19 September 2022
4 minutes read
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The cost of transferring money internationally can be daunting. There are hundreds of different options for transferring money, and each one has its own fees and markup. But don't worry! We've done all the hard work for you so that you can find the best way to transfer your funds without breaking the bank!
I was surprised to find out that the real cost of transferring money from one country to another is negligible. As per the International Monetary Fund (IMF), the fee should be a low fixed amount, not a percentage, because the cost of remittance services does not depend on the amount of principal. The real cost of a remittance transaction—including labor, technology, networks, and rent—is estimated to be significantly below the current level of fee being charged.
Currently the cost of remittance increases with the amount being transferred. Even for smaller transfers, the fees charged is insanely high. In the below scenario if a person in UAE transfers AED 50,000 he pays around AED 462.32 in form of exchange rate markup apart from the fixed transfer fees.
The cost of transferring money from one country to another can be broken down into 3 parts:
Fixed transfer fee
Exchange rate markup
Fixed Transfer Fee: Fixed transfer fee is typically a flat fee per transaction, and can vary depending on the provider you choose. However, some providers offer free transfers once you've transferred enough money to your account balance. The average wire transfer fee is around $5-10 per transaction, but it can be higher or lower depending on the currency pair used.
Exchange Rate markup: The exchange rate you see on Google is not the actual exchange rate that your bank gives you. When you are sending money the rate offered is lower than the rate you see on Google. This is called a markup. The markup is a percentage of the total amount of money being transferred from one account to another (usually between $50-$100). If you are transferring small amounts of money this does not affect you that much however, in case the transfer amount is higher this cost will be huge.
Float: The money you remit is held with the bank/exchange house for a day or two if you don’t elect express transfer. The funds remain with the bank/exchange house for that period on which they not only earn interest but also use it for working capital needs. You might also have noticed that in case you need to transfer money instantly the bank/exchange house charges higher remittance fees and also the exchange rate markup is very high.
There are many options for transferring money internationally, but for best results you should focus on a low fixed fee, a provider that transfers your money instantly, and no markup over the google rate for your currency pair.
Now that you have a better understanding of the cost of transferring money, the next step is to determine the best service provider in this space.
We hope that this information has helped you understand your options when it comes to transferring money. We know that it can be a difficult process and we want to help make things easier for all our customers! Give us a chance to help save you money on all your transfers.