Looking to save hundreds of dollars on your next international transfer?
Sending money abroad shouldn’t cost you a fortune. Yet millions of people face surprise fees every year simply by not understanding how international money transfers work.
Let’s dive into what’s really going on:
Banks intentionally hide their real costs behind confusing fees and poor exchange rates. A seemingly “small” bank fee of $20-$50 ends up costing you hundreds of dollars when you consider all the markups.
The good news is… it doesn’t have to be this way!
Once you know which questions to ask and how to spot a good provider, you can save a huge chunk of change on every transfer.
Table of Contents
Why International Money Transfer Fees Are So High
Prepare to be shocked…
The average global cost to send $200 to another country is 6.4% of the total transfer amount. That’s $12.80 in fees just to send $200 to your family overseas!
But wait, there’s more…
Traditional banks gouge you with even higher fees. Most major banks charge fees of $35-50 on average for outgoing international transfers. Add in exchange rate markups of 3-4% on top of that and your total costs can reach 10% or more.
If you have to send money to Poland for $1,000, you could be paying over $75 in total fees and markups just to get the money there using a traditional bank.
The Real Cost of Sending Money Internationally
Let’s take a look at what you’re actually being charged. There are actually four different types of costs hidden in every international money transfer:
Transfer Fees
The easy one: This is the flat fee the bank charges for actually processing your transfer. This varies between $20-35 for domestic transfers but goes up to $35-50 for international transfers.
Most banks only waive this if you meet certain criteria. For example, you may be charged no fee if you’re transferring over $5,000 or have their premium account.
Exchange Rate Markups
This is where banks make their real money…
When you send money internationally, your dollars have to be converted to the recipient’s currency. Banks will never give you the same exchange rate you see on Google.
Instead, they mark up the rate by an average of 3-4%. So if the actual exchange rate is 1.20, they’ll give you 1.15 and pocket the difference.
Intermediary Bank Fees
Here’s one most people don’t realize happens.
Your money has to travel from your bank to the recipient’s bank abroad. On the way it may pass through 1-2 intermediary banks. Each charges a processing fee of $10-25.
Those fees are usually deducted from the amount your recipient receives, not paid upfront.
Receiving Bank Fees
The bank where your recipient is opening their account may also charge a processing fee. This is $0-25 depending on the bank and country.
Smart Ways to Reduce Your Transfer Costs
The good news is you don’t have to accept these fees as unavoidable. There are proven strategies to save money on every international transfer:
Compare Different Providers
Not all money transfer services are created equal. Online money transfer companies typically charge much better rates than traditional banks.
Here are the global average costs for each type of provider:
- Banks: 11.48% of transfer amount for a $200 transfer
- Post offices: 8.52% average cost
- Specialist transfer companies: 5.33% average cost
- Mobile money operators: 4.47% average cost
Sending $2,000 with a specialist company instead of a bank could save you over $120!
Send Larger Amounts Less Frequently
Many providers charge a flat fee regardless of the transfer amount. So the smaller amount you send, the higher the percentage cost you’ll pay.
If you’re sending $200 and the fee is $25, that’s 12.5% of your transfer.
But send $1,000 with the same $25 fee and you only pay 2.5%
Consolidating multiple smaller transfers into one larger transfer can dramatically reduce your costs as a percentage of the total amount.
Choose the Right Currency
Many providers will give you a better rate if you send in the recipient’s local currency rather than converting from USD.
You may also be able to waive the fee entirely if you send in a foreign currency. Make sure to check both options before making a transfer.
Use Digital Services
Digital remittances cost an average of 5% compared to 7% for non-digital methods. Online and app transfers are almost always cheaper than going in person to a bank or post office.
Digital providers also usually have:
- Real-time exchange rates
- Lower fees
- Faster transfer times
- Better customer service
How to Choose the Right Transfer Method
With so many providers and options available, how do you pick the right one? Here’s what to consider:
Transfer Speed
Do you need it delivered immediately? Wire transfers and digital services can deliver funds within minutes.
If you can wait 1-3 business days, you’ll get much better rates with standard online transfers.
Transfer Amount
For small amounts (under $500), digital services usually offer the best rates.
For larger amounts (over $5,000), foreign exchange brokers can often give custom better rates.
Destination Country
Some providers specialize in certain regions. Do some research on providers that specialize in your destination country.
Recipient Preferences
Choose a provider that gives your recipient their preferred delivery option:
- Bank deposit
- Cash pickup
- Mobile wallet
Alternative Options That Save You Money
Beyond traditional banks and online transfer services, there are other smart ways to send money internationally:
Digital Wallets
PayPal and similar services let you transfer money between users in digital wallets. Fees are lower than banks but exchange rates may still be marked up.
Cryptocurrency
If you’re comfortable with crypto, it has very low transfer fees. Both parties just need to be comfortable using crypto exchanges.
Multi-Currency Accounts
Modern banks offer multi-currency accounts that hold several different currencies. You can hold your money in the recipient’s currency with no exchange fees if you time conversions right.
Making the Smart Choice
The bottom line is that you don’t have to be stuck with the high fees charged by traditional banks and providers.
You now know the questions to ask, the providers to compare and the best options for different situations.
Don’t be lazy and just use your bank because it’s easy. You can save hundreds every year with a few minutes of research.
Remember: The cheapest option isn’t necessarily the best. Consider transfer speed, reliability and customer service alongside cost.
Final Thoughts
Sending money internationally can be cheap if you know where to look. Global remittance flows are expected to reach $905 billion in 2024, so providers are competing harder than ever for your business.
Take advantage and compare providers, understand all the fees and always choose digital services when possible.
The money you save goes a long way for both you and the person you’re sending money to. Every dollar you don’t pay in fees gets to the people who need it most.
Don’t let traditional providers rip you off. You now have the knowledge to make smarter choices and keep more money in your pocket.
