Stop losing money every time you send money abroad!
Remitting money abroad is now a way of life for hundreds of millions of individuals. Whether sending to family back home, paying for overseas property, or handling business transactions… You may feel like the fees are unavoidable.
And you’d be right. Unless you know how to play the game, they are.
Here’s the thing…
Learning how those fees are calculated is half the battle. With a little bit of savvy and the right guidance, you can also send cheaply and faster than ever before.
Let’s take a look at how this game is played.
What you’ll learn:
- International Transfer Fees Explained
- How Much Does It Cost to Send Money Abroad?
- Traditional Banks vs New Transfer Services
- How to Save Money on Transfer Fees
How International Transfer Fees Work
Sending money abroad isn’t as simple as it used to be.
The good news is that international money transfer fees have never been this transparent before. But first, let’s establish what fees are actually being charged.
The first fee to consider is the transfer fee itself. It’s the obvious upfront payment for processing the transaction. But hidden inside are exchange rate markups, and that’s the one most people aren’t prepared for.
Breaking down the fees:
- Transfer fees: The upfront fee for processing the transfer
- Exchange rate margins: Hidden markup within the exchange rate
- Intermediary bank fees: Costs from third-party banks
- Receiving fees: Fees charged by the recipient’s bank
These fees add up. For someone who needs to send money to Jamaica regularly, or to any other country, it’s a smart money move to familiarize yourself with the fee structure.
This will help you make intelligent choices along the way.
Holy cow, right?
The True Cost of Sending Money Abroad
Let’s take a look at the big picture.
Research by the World Bank pegged global remittances at an average of 6.49% of the amount sent. If you transfer $500, $32 of that goes to fees.
Whew! Hold on tight!
There is a silver lining here though…
Different ways to send money aren’t the same price
The World Bank found banks were by far the most expensive method at 12.66 percent on average. Post offices follow at 8.52%. Specialist money transfer companies land at 5.33%. Mobile money operators have the lowest average at around 4.47%.
The country also matters. Sub-Saharan Africa remains the most expensive region at 7.73%. South Asia is the cheapest to send to at 5.16%.
These small differences add up over time. Take a family receiving multiple international money transfers a year, and the cumulative cost can hit the thousands in extra fees.
Multiply that by the millions who send abroad each year, and you have a very real problem.
Traditional Banks vs Modern Transfer Services
Banks ruled international money transfers for a long time.
The problem is they still do, with a hefty premium for the service. Traditional bank wire transfers charge between $35 to $50 for outgoing international wires. Then they also tack on the exchange rate markup on top.
Why are banks so expensive?
The costs compound at every stage of the process. Banks use correspondent banking networks of intermediary banks to reach the destination country. Each of these takes a cut of the pie along the way. The infrastructure to maintain secure and compliant channels, the currency conversion costs, and then the service charge itself all get passed on to the customer.
Chase, for instance, gives a $10 discount on domestic wires when sent online versus in-person.
The landscape has changed drastically in recent years. Fintech startups offering digital-only transfer services are a game-changer. On average, the total costs for digital transfers was 4.96% compared to 6.94% for non-digital. That’s a 28% reduction just for choosing the right platform.
These modern players focus on streamlining the service. The lack of legacy intermediaries translates directly to savings. Mobile apps make it easy and instantaneous. Competition in the market also helps keep costs lower.
What Affects Your Transfer Costs
Costs vary for several reasons.
Knowing these factors in advance can help with budgeting for and timing international transfers.
Factors that affect transfer costs:
- Transfer amount: Fees often scale inversely with the size of the transfer
- Payment method: Cards are more expensive than account transfers
- Delivery speed: Instant vs same or next-day is a premium
- Destination country: Certain corridors are cheaper due to competition
One factor you may not consider upfront is the payment method used. Transfers with credit cards seem super easy but almost always have the worst fees of any option. Account transfers or debit cards are almost always the cheapest.
Speed is another big one. Last minute wire requests carry a premium over regular timed transfers. Planning ahead with standard timings usually keeps more money in the recipient’s pocket.
Smart Strategies for Reducing Transfer Costs
Saving on international money transfers is mostly a mind game.
Remittances require a little know-how to compare and research the best options. The great thing is some simple strategies work every time.
Comparison shop before every transfer. Exchange rates and fees change all the time. The most expensive service one month may be the cheapest this month. A few minutes of comparison can pay dividends.
Factor in the total cost, not just fees. A 0% fees promise sounds great. But many companies recover the cost through awful exchange rates. Look at the total amount received at the end of the process.
Use online channels whenever possible. Remitting digitally saves money every single time. Apps and online websites have less overhead to cover, and those savings are passed on to customers. Brick-and-mortar branches always come with a premium.
Time transfers when the rate is good. Exchange rates move throughout the day. Tracking the rate and transferring when it’s in your favor can save serious money over time.
Setup rate alerts in your transfer apps to help spot the best time to send money.
Batch up smaller transfers when possible. Fixed transfer fees are a killer. Sending a few smaller transfers instead of a larger one can end up costing more in fees alone. If possible, batch up several into one larger one.
Choosing the Right Transfer Service
There are tons of money transfer services now available.
Traditional banks to fintech startups, the options feel overwhelming. But picking the right service isn’t actually so hard once you know what to consider.
Speed is important depending on the situation. Emergency funds for family living abroad need to be fast. Regular monthly rent payments can afford to take the cheaper, slower route.
Coverage is important based on your destination. Not all services cover all countries. Some providers dominate certain corridors but have weak reach in other areas. Double-check the country is supported before transferring.
Wrapping Things Up
Remittance fees can be a money pit.
But most of those fees are avoidable if you know what to look for. Banks charge for what is now a commodity service. Modern transfer platforms offer a far better value on fees, speed, and convenience.
Let’s recap quickly:
- Compare total costs including the exchange rate markup
- Always choose digital money transfer services
- Don’t forget speed, convenience, and service coverage
Small fee savings on individual transfers might not feel like much. But over years and decades of sending money abroad, those fees add up into the many thousands. Those are better spent on the people and causes that matter most.