Pay Attention to Those Money Transfer Fees – They Can Create a Hole in Your Finances
Personal finance is the art and science of handling money and it relates to all the decisions that an individual or family make in relation to their finances. International money transfers are a niche, often overlooked; yet, important part of personal finances. Canadians generally have different reasons to transfer some money abroad at different times. If you don’t need to send money oversea today, that’s not guarantee that you won’t have a reason to send money abroad next month.
When a friend or family member lose their wallet or run out of cash while vacationing in Paris, you’ll need to make an international money transfer to bail them out.
- When you are traveling overseas for business or pleasure, you’ll need to make international money transfers to book your hotel, tours, and get the local currency of your destination.
- Some other people might need to make international money transfers to buy properties overseas or to invest in other opportunities beyond our borders.
- If you decide to school or take professional courses abroad, you’ll definitely need to pay your tuition with an international payment of sorts.
Traditional international money transfers with banks are expensive
When Canadians make international money transfers with traditional players such as banks or Western Union, they pay unreasonably high transaction fees without knowing. The worst part is that the fees you pay on international money transfers tend to be arbitrary because traditional financial institutions are not transparent with their charges.
For instance, you’ll be charged minimum fees, handling fees, and flat fees. In addition, your money transfer might be subject to hidden charges such as FX rate commission, and payment method charge – you can pay as much as 5% more if you are transferring money from a credit card.
My research on the margins for money transfers on Royal Bank of Canada shows that you can expect to lose 1.8% in margins to transfer $1000 CAD to USD and you can expect to pay as much as 2.6% on CAD money transfers to Euro. The margins on exotic currencies such as the Thai Baht and Mexican Peso are exponentially higher.
In contrast, a UK-based FC Exchange charges much lower fees on international money transfers– you can generally expect to pay fees under 1% and as low as 0.5% in fees on large money transfer orders. When you take the exchanges fees into proper account, you’ll notice that the fees do add up irrespective of whether you are make a large international money transfer or multiples of smaller international transfers.
Here’s why you should consider using an online money transfer service
As earlier explained, online money transfer services tend to charge relatively lower transfer fees than banks. For instance, World First Money Transfer is a great alternative to Canadian banks for international money transfers. The company offers competitive rates and it provide a free rate alerts to let you know when the spot price might be attractive for your money transfer. For money transfer companies, moving money from one part of the world to another is the only business that they do; hence, they have core competencies to enjoy the economies of scale. In contrast, money transfers are just one of the many services that banks offer; hence, they tend to incur high overhead costs to process international money transfers.
Secondly, online money transfer companies provide a commendable level of convenience to clients. You can make a quick application with an online form instead of having to go to the bank to make a transfer. Online money transfer companies also allow your recipient to pick up their cash from convenient locations that is not necessarily a bank in different parts of the world.
Lastly, online money transfer companies deliver impressive speed in processing international money transfers. They can process, transfer, and make your money available to the recipient within days or hours. Some online transfer companies are also experimenting with blockchain-based solutions that can facilitate the near-instant transfer of money across borders for pick-up within minutes.