Banks have been growing in complacency when it comes to fees and foreign exchange. Whilst they were always expensive, they were once our only real option. However, with the rise of fintech firms and advancements in infrastructure, competition has heated up and banks are being surpassed very quickly when it comes to sending and spending money abroad cheaply. When looking at how to transfer large sums, there are easily twice as many options today than 5-10 years ago.
This article aims to cover the rough costs of using banks when sending money overseas from various countries, and then assess which alternatives we have to transfer large sums of money abroad for cheap.
The cost of transferring money abroad with banks
When we think of costs when transferring large sums of money abroad, we must consider the ways in which we lose money, not just what is described as a fee. Banks tend to have a habit of charging us a fee, which they declare, but then also taking a significant exchange rate markup.
This exchange rate markup is the difference between the fair, mid-market exchange rate and the rate that they’re offering you. Let’s say the USD 1 = EUR 0.95, but the recipient is only going to receive €92.15 from your $100 transfer (as opposed to €95), then the markup here is 3%. This is a fee, but it’s never described as one. Because it’s not technically a fee, it’s rarely consistent, meaning the banks can just make it up on the spot for each transfer and won’t announce it in the literature.
Because you seldom find it openly declared as a consistent figure, we must trust the reports and guesses of online review websites and dissatisfied customers to help us gauge a rough estimate of the markups. In some instances, particularly in Australia, exchange rates are openly declared on the website, though it’s still rare that they will calculate and present the margin as a digestible percentage for you. The lack of transparent information and slick quote calculators for non-customers is precisely another reason why they’re being left behind fintech money transfer firms and specialist brokers.
Finally, there’s also the caveat that a lot of the markups reported are, by nature, from more common currency routes. The less liquid and more exotic a currency route, the worse the markup will become. So, a lot of the figures below will be the best-case scenario, whilst if you sent a large sum of money to Uruguay or in Thai baht, it could be considerably more expensive than when sending Euros or USD.
The costs of transferring large amounts abroad from UK
It’s generalised that banks charge between a 3% and 5% exchange rate markup, and this appears to be true when transferring a large sum from UK using British banks.
There are reports of a markup of roughly 2.75% with Barclays, though there are not usually any fixed fees. 2.3% is often quoted at HSBC when sending money to the US plus a maximum of £5 fixed fee (zero if the recipient is in the EEA or they have HSBC).
Between 2% and 4% markup can be expected at Santander plus a £25 fixed fee outside the EU, with 2.95% for purchases or cash withdrawals made outside the UK.
Finally, Lloyds are reported to have a markup between 2.5% and 3.2% and a £12 correspondent bank fee for transfers within Europe or NA.
The costs of transferring large amounts abroad from USA
Transferring a large sum from USA shares a similar story. For example, there is a $35 fixed fee when sending money abroad with Citibank, though it can be less with other account types. There are conflicting reports over the exchange rate received at Citibank, but 1.75% markup seems to be the average, which seems to be as good as you’ll get as a banking customer (but please double-check every transaction when using a bank).
JPMorgan Chase charges 3% on debit card transactions that aren’t in dollars as well as a fixed fee for foreign ATM withdrawals. It’s difficult to give an exact number for their exchange markup when sending money overseas, but that’s exactly the issue here – there’s no transparency. Some suggest that it can be as high as 3.5%.
The costs of transferring large amounts abroad from Australia
International transaction fees at Commbank, Australia’s number 1 bank, are 3%. The fixed fee for sending money overseas is $30 when done through a branch or $22 when done through the app, but there are other fees to watch out for. For example, there’s an additional $17 fee when sending GBP. It gets very confusing and very expensive, fast.
ANZ can charge you $15 when receiving money from abroad and charge $7 or $9 for outgoing transfers depending on the recipient location. The exchange rate margin varies but there are reports of it being around 3%.
Westpac has a $10 – $20 charge on overseas payments, but it can be $32 in many other currencies. Sending money to the UK via a transfer would cost $10 plus a 4%+ exchange rate markup, according to some experiences.
The costs of transferring large amounts abroad from Spain
Finally, transferring a large sum from Spain appears to be no different, either.
BBVA seemingly charges markups between 3% and 5%, though it can vary, as well as $5-$45 fixed fees depending on what account you have and where the money is headed.
Caixa Bank charges a €27 fixed fee, a 0.4% fee for transfers in Euros, plus a 2.5%+ markup – extraordinary.
Banco Sabadell does a good job at not charging fixed fees, but only insofar as an eBay seller offers free delivery but puts the price of the product up accordingly. The exchange rate margin is around 3%, or a little closer to 2% for major currencies like GBP and USD transfers.
Transferring large sums of money for cheap using dedicated payment systems
As we can see, big banks all operate in a pretty similar way and all use SWIFT. Although Australia does appear to be the most expensive, we can’t be exact with some of the markups, and they can all be vaguely grouped together as being overpriced. The lack of online quote forms from banks highlights that they’re not even making an effort when it comes to overseas transactions – and that you should always double-check every transfer if you do use a bank.
So, where do we go if we want a fair price?
If we want the best possible currency solution, we should go to a currency specialist – places that specifically compete on exchange rates as opposed to exploiting your goodwill and dependence on them.
Currency brokers is a term we use for places that specialise in transferring large sums of money abroad, whilst money transfer companies (i.e. Wise) are for smaller, frequent amounts.
Transferring large amounts of money abroad with a currency broker is likely to land you with no fees plus an exchange rate margin of 1% or less. This means you’re being charged over 3 times less than banks on the exchange rate markup alone. And, whilst some currency brokers do charge a fixed fee, there are plenty that do not.
Furthermore, it’s not just about being cheaper. Brokers offer free dedicated dealers which play a vital role in finding the best way to send money abroad. They may suggest a different approach or timing to your transfer, or perhaps organise a hedging product on your behalf to reduce your currency risk.
Ultimately, banks need to be avoided when transferring large sums of money abroad.