Congratulations, you’re about to get the scoop on fees and all the (sometimes hidden) costs involved with transferring money. We have chosen three of the largest, lowest cost services to compare.
The best bit
With this knowledge – you will see you how you can save on fees and costs.
I assume you already know you can save a small fortune by not using a bank – often over 5% including all the extra fees.
In this article, I will be focused on the fees and costs for OFX, Wise and CurrencyFair which are all heavyweights in the business of moving money internationally and are regulated by the FCA amongst others.
Skip down to info below for fees and costs for;
First – 4 Ways You Can Save Money
There are four ways you can be relieved of your cash (and after reading this – save it) on the way to its destination. Firstly a sending fee by your bank, second a fee from your money transfer provider, third the exchange rates and lastly, a receiving fee.
1. Sending Fee
This may be charged by the sending bank depending on the method you send money to fund the transfer. This fee has little to do with service you choose and more to do with the method you use and bank you are with.
The big tip here: See which options are available from your bank for the money transfer service you use and then see which is the better option for the amount you want to transfer.
2. Transfer Fee
Typically this is a small fixed fee.
3. Exchange Rate
Typically a percentage of the mid-market or interbank rate (wikipedia).
4. Receiving Fee
This is a fixed fee charged by the receiving bank and can be significant (up to $50USD or £30 although usually about half that). Money transfer companies attempt to reduce this fee to zero by having bank accounts in the receiving country. This way they can pay into the receiving bank account just like a local would – without fees. However because transfer companies deal with hundreds of countries this is not always possible.
The big tip here: Choose larger services like OFX, Wise and CurrencyFair because their larger reach generally means more bank accounts in receiving countries.
OFX charges a transfer fee of $15 (in some countries) for transactions under $10,000/approx. £5000. For transactions over that amount there is no fee. The exchange rate fee is 0.6% to 2.0% on a sliding scale as the amounts increase the percentage reduces.
If you want to use OFX, you can avoid the transfer fee for ever.
Since OFX only shows you the rate they offer after you sign up, we logged into our account and made this little chart for you.
Bottom Line: In our common currency test, for amounts larger than about $7500/£4000/€5000 in major currencies the cost is 1% and continues to get to 0.68%.
Peer to Peer (P2P) Services – Wise and CurrencyFair
CurrencyFair and Wise are leaders when it comes to transfers below about $7000 USD. Both started as P2P services which match customers who want to transfer one currency into another, with people who want to execute the opposite swap.
This matching service ensures the money doesn’t actually cross any borders enabling the services to save you loads of money on transfer fees. This means the P2P model makes it potentially very cheap.
However, the P2P model has its limitations as the amounts increase because matching becomes more challenging causing costs to rise as the services step in to complete the transaction.
Wise has moved away from P2P, but retains most of the advantages including low fees although CurrencyFair can be even cheaper.
Wise shows the mid-market or interbank rate and charges a flat fee and a percentage on the exchange rate which the show before you sign up.
Transfer Fee: Fixed fee 50p – £2 or equivalent
Exchange Rate Fee: 0.5% to 1.5% of the amount dependent on currency pairing
Extra Fees: Apart from convenience, using debit or credit cards have the advantage that you can save a day or two on the speed of the transaction because Wise gets funding for the transfer (see (1) above) practically instantaneously. However debit and credit cards charge fees to Wise which they pass on.
The big tip here: Avoid the extra fees by using direct debit or similar from your bank account.
The second big tip here: Use the tool provided here that will give you a quote and show you exactly what you will pay in fees.
Bottom Line: The fees you pay varies a lot in percentage terms, however for smaller amounts less than about $7500/£4000/€5000 in major currencies they can be your best bet.
CurrencyFair charges a fixed flat fee and an exchange rate fee.
Transfer Fee: €3, £2.50, $4, HK$25
Exchange Rate Fee: 0.25% to 0.6% dependent on currency pairing and ability to match funds.
CurrencyFair charges 0.25% or 0.3% of the total amount exchanged on each side when customers match each other (depending on the currency). In the event that there are no other “peer” on the other side to swap your funds with, CurrencyFair steps in to make the transaction happen. This results in a charge of 0.4% to 0.6% of the amount exchanged (again, depending on the currency pair).
So depending on which way you’re exchanging, and the activity on the marketplace at that time, you’ll normally pay between 0.25%, to 0.6%, plus a fixed €3, £3, $4
The big tip here: Smaller amounts and more common currencies are easier to match which tends to mean very competitive total costs. While CurrencyFair is not quite as transparent about its Fees as Wise (until you sign in) they are very competitive.
That said, 3rd Party Bank fees (which we cover below) are usually going to be less of an issue with Wise or OFX due to their reach internationally.
Each one of these money transfer companies has been chosen for its low cost fees. These companies are certainly all going to be a big cost saving on transferring money using a bank.
However for a direct comparison, they are all very different depending of the method you use to fund the transfer, currencies, amounts, banks and countries you are dealing.
In Simple Terms
These P2P services are usually going to be the most inexpensive option for smaller amounts below $7500/£4000/€5000 for common currencies like USD, GBP, EURO, AUD, CAD and NZD.
For larger amounts above $7500/£4000/€5000 and less common currencies the differences become minimal and other important aspects come into play.
If you want to squeeze every cent, comparisons need to be made on an individual basis, which can be done most easily by entering the amount and currencies into the Wise tool (above) which is very transparent on total fees and then comparing that with the OFX chart above (assuming you are dealing in mainstream currencies like USD, GBP, EURO, CAD, AUD, NZ).
3rd Party Bank Fees
Another important aspect is to consider is fees the banks at both ends charge. Big money transfer services like these maintain a network of bank accounts worldwide which enables you to send and receive money to them cheaply as possible.
Of course, the cheapest services does not always mean the best. Often safety, security, speed and customer service are legitimate needs – OFX (review), Wise (review) and CurrencyFair (review) are all strong contenders.