Saving Money on Money (International Transfers)

This is not a sponsored post, but there are affiliate links to TransferWise, a company we enthusiastically support and reached out to.

I love technology. So much information at our fingertips, such almighty power compared to twenty years ago. So why is so much banking technology awful? At work I could spin up a network of VMs in minutes, so why does it take multiple days to make a transfer of funds from one bank in Massachusetts to another bank in Massachusetts? Why? Why does it need to be that way?

The worst culprit by far has been international transfers and exchanges. We have family outside of the US, and occasionally we like to send money overseas. Our first experience with transferring money was just painful. We searched around, trying to find the best combination of rate and fee for our use case.

The most frustrating aspect of shopping around for international money transfer services is that it is nigh impossible to compare rates side-by-side without individually going to each site, putting in your numbers (and occasionally personal information, bleh) on each and every website. Sometimes sites will advertise any transfer fees (though even then, it’s usually not in a consistent way), but there is very little transparency when it comes to exchange rates.

The price to send money is a two body problem – transfer companies make money on both transfer fees and exchange rates. A transfer fee is a flat or sliding scale fee that is typically advertised and somewhat easy to find. In some cases, there will be “No fee.” Yeah, no fee, but a crappy exchange rate.

Table – The latest rates and fees from the handful of sites that did not suck. Note, this is just for one amount sending to one currency. You’d have to do this from scratch if either of those variables changed, just to be sure you were getting the best deal:

Exchange rates are not usually advertised until you start taking the steps needed to make a transfer, even though the money you lose on a bad exchange rate can easily meet or exceed any transfer fee. You may even be asked to provide your email address in order to get a quote. That’s fair, right? No one has ever used consumer email addresses to sell or spam, right?  

Which company has the best rates depends on which currency you’re converting to, and as far as I can tell, changes over time. Furthermore, the exchange rate is often not nailed down. That is, the actual amount transferred might change if the market exchange rate changes between the day you initiate the transfer and the day your money finally makes it to its destination, making at least some of your research absolutely pointless.

On our first international transfer, we decided to go through a correspondent bank, with a guaranteed exchange rate. This meant confirming the agreed transfer online, then filling out a second form through our local credit union. Then there were two in-person interactions, three phone calls, and an online signature. After all that, we found out that the transfer didn’t end up going through the correspondent bank that we lovingly researched. Thankfully, we actually benefited from the way the exchange rate changed over the incredibly long waiting period, but still. Frustrating.

At this point in time, we knew about TransferWise, but they had yet to get approval to operate in Massachusetts. Oh, has that changed now. If you do not use TransferWise and live between two countries, have family overseas, or send invoices to customers in foreign currency, I feel sorry for you**.

TransferWise cuts out the middleman in international transfers, taking advantage of people sending money back and forth in different currencies, making their exchange rate the mid-market rate. You know that exchange rate you see when when googling something like “USD to CAN”? Yeah, that’s the exchange rate TransferWise uses.

Pretty spiffy, biffy – check it out for yourself!

If you really want to do it the old fashioned and excruciatingly tedious way, check out this Consumer Reports article. You can even compare their table from 2012 to our table I painstakingly crafted for you.

**I would be remiss not to mention Currency Fair as well here. They have a very similar way of working, and it looks like they could be a better option for the bottom line in some cases. We cannot speak for their services, as they work in a much more limited set of currencies and are not licensed to receive business from the United States.