Product Review

REVIEW: TransferWise & International Transfer Fees

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Are you unsure of the fees involved to make international money transfers?

I will show you how to calculate the fees on overseas transfers and take a quick look at the new peer to peer exchange solution TransferWise (it doesn’t charge you a fee on the currency).

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This is NOT a product endorsement, recommendation or statement of opinion, this blog is fee review based on the facts that are available at the time of writing, intended to inform and entertain – please enjoy it as such.

International Money Transfers

It is estimated that Australians transfer around $10 billion overseas each year.

Whether you are sending funds to a family member, or paying a supplier in an overseas country, international money transfers are set to continue growing.

Unfortunately most Australians rely on their bank to make the transfers, instead of shopping around for a better deal.

How Do Money Transfer Providers Make Money?

There are two ways financial institutions make money on international transfers:

  1. Transfer fees
  2. Currency rates

Let’s take a closer look to see exactly what fees and costs you are up for when making an overseas transfer.

1. Transfer Fees

Transfer fees should be clearly outlined by your financial institution before you make a transfer.

Calculate Your Transfer Fee

  • Are quoted as a flat fee (eg $25) or percentage fee (0.7%) of the initial amount you want to transfer
  • If it is quoted as a percentage simply multiply the transfer fee by the amount you want to transfer = $1,000 x 0.007 = $7 transfer fee

What Does TransferWise Charge?

TransferWise charges the following transfer fees:

  • 0.7% for the major currencies such as the EUR, USD, GBP; to
  • 2.5% for transfers to Colombian Peso (COP).

See the transfer fees for yourself by clicking the link below:

Transferwise Transfer Fees

2. Currency Fees

The currency fee is often the hardest to work out because:

  • it involves knowing the current currency rate and
  • comparing it to the currency rate your financial institution has quoted.

Calculation: How Currency Fees Work

Foreign exchange counters advertise exchange rates at different prices: we buy at & we sell at.

International Money Transfer - Currency Board

How to Work it Out Yourself

Find the real exchange rate (google search), which on 24 January 2017 was 0.76 Australian Dollars (AUD) to 1 US Dollar (USD).

International Money Transfer - Mid-Market Rate Google

Compare to the exchange rate on offer.

For example Exchange Provider A may offer the following quotes:

  1. We buy USD at 0.73
  2. We sell USD at 0.79

The difference between the buy and sell price and the mid-market currency rate is the currency fee, in this case 3 cents (0.79 – 0.76 = 0.03).

The currency fee as a percentage is therefore 3.9% (0.03 / 0.76 = 3.94%).

Currency fees tend to be the biggest cost when making an international transfer  – make sure you do your research.

What Does TransferWise Charge?

TransferWise doesn’t take a commission on the exchange rate.

  • TransferWise aims to transfer your money at the actual exchange rate, known as the mid-market exchange rate.

CHART: TransferWise Exchange Rate – 24 January 2017

International Money Transfer - Mid-Market Rate

DIAGRAM: Google Exchange Rate – 24 January 2017

International Money Transfer - Mid-Market Rate Google

EXTRACT: TransferWise Does Not Take a Fee on Currency (UK example shown)

TransferWise Currency Fee

 

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Let’s Take a Closer Look at Transferwise

International Money Transfer - Transferwise 4

Some key facts and figures

  • Transferwise was founded in 2010, launched in 2011.
  • One of the co-founders was a foundation employee at Skype.
  • Richard Branson (Virgin Group) and Peter Thiel (Paypal) invested in the company in 2014.

International Money Transfer - Transferwise Branson

  • TransferWise employs more than 600 people from 52 nationalities.
  • Customers are transferring more than $800 million every month through TransferWise and saving more than $41m compared to using other providers.
  • You can send money from 35 countries and receive money in 60 countries using TransferWise, adding up to total of 600 routes.
  • TransferWise has over a million customers

How Does TransferWise Work?

TransferWise uses a peer-to-peer platform that matches your payment at the mid-market exchange rate with one or several other people who are making an opposite exchange.

The mid-market rate: is the real exchange rate (the one that you see reported on the news) – it is the midpoint between demand and supply for a currency and is also known as the inter-bank rate.

International Money Transfer - Transferwise 2.png

If there is no corresponding party to swap funds with when you want, then TransferWise will go out to the interbank market and buy the missing currency for you.

Is TransferWise Safe?

Yes, TransferWise is fully authorised by the Australian authorities:

  • ASIC; &
  • AUSTRAC 

As part of ASIC rules to protect customers, Transferwise must keep customers’ funds separate from their own and have strict anti-money laundering procedures in place.

What Currencies Does it Support?

TransferWise currently works with 39 currencies and as more customers join more are added.

You can currently make transfers to and from each of these currencies: 

You can currently make transfers between these currencies:
  • Euro
  • British pound
  • US Dollar
  • Australian Dollar
  • Swiss Franc
  • Canadian Dollar
  • Polish Zloty
  • Swedish Krona
  • Norwegian Krone
  • Danish Krone
  • Hungarian Forint
  • Czech Koruna
  • Bulgarian Lev
  • Romanian Leu
  • New Zealand Dollar
  • Brazilian Real
  • Singapore Dollar
  • Japanese Yen
  • South African Rand (SWIFT only).
You can also send money from the above currencies to:
  • Indian rupee
  • Hong Kong Dollar
  • Malaysian Ringgit
  • Philippine Peso
  • Pakistani Rupee
  • Moroccan Dirham
  • Thai Baht
  • Emirati Dirham
  • Ukranian Hryvna
  • Indonesian Rupiah
  • Colombian Peso
  • Georgian Lari
  • Turkish Lira
  • Mexican Peso
  • Russian Rouble
  • South Korean Won
  • Chinese Yuan
  • Sri Lankan Rupee
  • Bangladeshi Taka
  • Vietnamese Dong

How Do I Send Funds via TransferWise?

Transferwise is 100% online (or mobile app), so no cash or cheques.

You can make transfers via:

  1. Bank transfer,
  2. Debit card or even
  3. Credit card.

Note there are extra charges when you use a credit card.

International Money Transfer - Trasnferwise 3

 

How Do I Open an Account?

It’s free to open an account and you can do so here:

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Summary:

International Money Transfer - Transferwise 4

  1. You transact at the mid-market exchange rate (no commission is charged on the exchange rate)
  2. TransferWise charges a transfer fee which you can calculate using the link provided
  3. TransferWise is 100% online, it even has a smart phone app
  4. You have a range of payment options from bank transfer, to debit or credit card.
  5. It’s a peer to peer business that still falls under the ASIC and AUSTRAC requirements.
This blog provides links to third party sites, aimed at helping you gather the information required to make an informed decision – we may receive payment of a commission or other fee for these referrals.

 

The Wealth Guy Signature

Joshua Stega

The Wealth Guy

Joshua Stega is an expert financial adviser and founder of JAS Wealth in Sydney. He specialises in the habits and behaviours of wealth. Joshua has a Masters in Taxation and Financial Planning and is regularly featured in the media

M.TaxFP, LLB(Hons), B.Bus(Acc), FTI, Adv.DipFP, Dip.FP, SMSF Specialist
The information on this blog and website is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision. We recommend you consult a licensed financial adviser in order to assist you. This blog provides links to third party sites, aimed at helping you gather the information required to make an informed decision – we may receive payment of a commission or other fee for these referrals.
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