Costs of Sending Money Internationally
Just as there’s no such thing as a free lunch, there’s also no such
thing as a free international money transfer. No matter which
method you use, how much you send, or to whom, you’ll lose a little
money in the process, whether it’s from sneaky bank fees or a crummy exchange rate.
Here’s what to watch for and how to keep the most money in your –
and your recipient’s – pocket.
When you send money across borders, the financial institution you
use will most likely charge you a wire transfer fee. It may be a
fixed amount or a percentage of the amount you’re sending, and it
can be as little as a few dollars to as much as $50 for a single
Another thing to keep in mind is that some banks or wire transfer
companies charge different fees depending on the currency you’re
sending. If you’re sending dollars from the United States to
another country that uses U.S. dollars, then you may not incur as
much of a fee as you would if the bank had to change the currency
format. Some banks, on the other hand, will charge you less in fees
if there’s a currency conversion involved. If you have a choice
over which currency to use, ask the bank if using one currency over
the other will get you a better rate or cost less in fees.
Some banks charge you different fees based on how you initiate the
transfer. For example, if you request and process the transfer over
the phone, that may cost more than setting it up online.
Finally, if you need to expedite an international money transfer,
that will likely also incur an extra fee.
Prepaid Debit Cards
If you’re using a prepaid debit card instead of a bank to send
money, that comes with its own fees. Not all cards charge fees, and
not all cards charge the same kinds of fees, but there are several
common ones to watch for.
Does the card require a monthly fee, whether or not you or the
recipient use it? Is there a withdrawal fee if the recipient uses
the card to get cash from an ATM? Is there a reloading fee for
adding more money to the card?
These types of prepaid cards charge so many different fees that the
Consumer Financial Protection Bureau has a page explaining all the different kinds of fees to look out
for. Check it out to educate yourself before choosing to send money
internationally via prepaid debit card.
Another way that banks and money transfer companies make money is
by giving customers a poor exchange rate. An exchange rate is how
much one currency is worth compared to another. Set by the Foreign Exchange Market, or Forex, this continually changing rate tells you how expensive
it is to buy, sell, and exchange currencies at any point in time.
Many banks profit from customers sending money abroad by giving
them a worse exchange rate than they would get on the open market.
The banks then keep the difference in amounts as a way to recoup
For example, let’s say you want to send $20 to someone in Mexico,
where they will receive it in pesos. Let’s also say the current
public exchange rate is 19.18 pesos for $1 U.S., so your recipient
should receive 383.69 pesos.
However, instead of taking your $20 U.S. and giving the recipient
383.69 pesos, the bank rounds the exchange rate down to 18 pesos
for $1 U.S., so the recipient only receives 360 pesos. The bank
then keeps the 23.69-peso difference as a way to make money on the
transaction. Many banks and money transfer services that advertise
themselves as “no-fee” make their money in this way instead. Always
read the fine print carefully and do some arithmetic before you
choose a service just because they claim they don’t charge a fee.