When you’re sending money internationally, getting a good deal on the exchange rate is the best way to save money – especially large transfers.
OFX claims to offer “bank-beating” exchange rates for large transfers.
We uncover the OFX exchange rate and other fees that can be charged by OFX and their competitors.
And how OFX makes money with their low exchange rate claim.
Let’s get stuck in!
Disclosure: This post contains affiliate links and potential savings on transfers if you use some of the links! For more information, see my disclosures here.
1. The OFX Exchange Rate
But this is not the rate that they offer to their customers – more about that in a moment.
When you go to OFX’s currency converter, they show the “interbank rate” for your chosen currency pair.
Mid Market or Interbank Rate
Major financial institutions – like banks and licensed money transfer companies – are willing to pay a certain rate when they exchange currencies (buy or sell) amongst each other. The mid-point of their buying and selling rates is known as the mid-market rate and is considered the fairest rate for currency exchange.
This rate is pretty standardized, but sometimes it can vary between large financial institutions.
As a regulated money transfer service, OFX swaps, buys and sells currencies at the mid-market rate and they add a margin to it.
As they say:
Is this true?
Even though you need to log in to get a custom exchange rate from OFX, we’ve decided to do the leg work for you for some popular currencies.
|Currencies||Interbank Rates||Exchange rates from banks||% in Fees on|
|USD-EUR||1 USD = 0.9533 EUR||Bank of America: 1USD = 0.9101 EUR||4.64%|
|USD-CAD||1 USD = 1.297 CAD||Bank of America: 1USD = 1.2442 CAD||4.15%|
|USD-PHP||1 USD = 54.52 PHP||Bank of America: 1USD = 50.41 PHP||7.83%|
|GBP-EUR||1 GBP = 1.1658 EUR||Barclays: 1 GBP=1.1122 EUR||4.70%|
|GBP-USD||1 GBP = 1.2231 USD||Barclays: 1 GBP=1.1703 USD||4.41%|
|CAD-INR||1 CAD = 60.2798 INR||Royal Bank of Canada: 1CAD = 57.97 INR||3.90%|
|AUD-INR||1 AUD = 54.042 INR||Commonwealth Bank: 1 AUD = 51.22||5.36%|
Now, in our experience the margin on the OFX exchange rate goes down as the amount increases.
Here is a chart we made by checking the exchange rate based on different amounts:
OFX does indeed pass on a lot of savings. In this sample, many banks added on a 3-4% margin for all amounts while OFX started at around 2% and went far lower.
It is also important to note that these can be the total fees for OFX – as in money delivered but as we will show in the next section banks can add on other fees.
2. How does OFX Make Money?
OFX may be relatively cheap international money transfer service but they’re not free.
There are two fees when you send money abroad with OFX:
- The margin on the exchange rate
This is a variable percentage fee that goes down as the amount increases, making large transfers very affordable.
- Transfer fee
So that OFX can make money on smaller transfers they sometimes add a $15 fee (below $10,000) however we organised to have this fee removed (opens a new tab) so you can avoid this fees all together – if applicable.
Which means – sending lower than $10,000 can turn out to be expensive with OFX.
That’s why for smaller transfers we suggest services like
- Wise (review) – very affordable bank transfers at the interbank rate
- WorldRemit (review) – affordable cash transfers
- Remitly (review) – instant cash transfers
3. How Does OFX Compare with Banks and other International Money Transfer Services?
While OFX doesn’t offer transfers at the mid-market rate, they’re still one of the most affordable services for large transfers.
So how do they make large transfers affordable, while staying profitable?
For that we need to look at the four fees you need to watch out for when you’re sending money abroad with any money transfer company or bank:
3.1 Sending Fee
This is the fee charged by your bank or card issuer, not money transfer companies like OFX.
The sending fee depends on the funding method: if you fund your transfer from your bank account, the bank may charge you a fee.
If it’s funded by a credit card, you’ll pay a 3% cash advance fee.
OFX minimizes or even eliminates these fees with their 115 local bank accounts world wide.
Since the initial transfer from your bank account to OFX’s local account is a domestic transfer, banks may charge less for this – usually free.
In all other cases, banks often charge between $10 and $50 for this fee alone because they are making a Wire transfer through SWIFT.
Here are some examples of sending fees worldwide: U.S. Bank $50, Bank of America $45 for USD, Barclays up to £40, NatWest up to £15,TD $40 USD, RBC $35 and Commonwealth $12 online/ $30 in branch.
3.2 Transfer Fee
This is the fee charged by banks and money transfer companies based on the amount, transfer method, and currency pair.
OFX sometimes charges a flat $15 fee for transfers below $10,000 – but you can get it removed – for ever.
3.3 Exchange Rate
OFX as well as their competitors and banks charge a margin on the exchange rate to make money from your transfers.
For banks, this can often be between 2-5%, which is usually the main the cost of the transfer.
OFX offers a lower margin and for larger amounts over about $7000 USD the fees are typically just a fraction of the banks and very competitive compared to other services.
3.4 Receiving Fee
This is the fee charged by your recipient’s bank depending on the amount or their country’s banking regulations.
Again, OFX removes or minimizes this fee by having local bank accounts.
4. How Do You Lock in the Best Exchange Rate?
OFX offers many options to lock in a favorable exchange rate and save big on your large transfers.
With a Forward Contract, you can lock in a rate of your choice for up to 12 months.
Don’t want to miss out on your target rate? You can opt for a Limit Order with OFX – where you let them know about your desired rate and they get in touch with you as soon as this is reached.
Ready to transfer right away? OFX also offers Spot transfers where you can lock in your exchange rate for 24-48 hours and send your money to OFX to process the transfer.