What You Actually Pay on an International Transfer

Kanin D. Alldredge, JD, MSQE

Legal & Quantitative Analyst / Author / Educator, The Currency Classroom

Free

When you send money to another country, the number they show you is the fee. The number they do not show you is usually the real cost.

That gap, between the fee you can see and the cost you cannot, is the entire subject.

Here is how it works. To send your money abroad, someone has to turn it from your currency into theirs. And the rate they use to do that conversion is where most of the money quietly changes hands. There is a true rate, the one two large banks would trade between themselves, and then there is the rate you are actually given, which is a little worse. That small shave, taken on the whole amount you send, is very often larger than the tidy fee printed next to it.

So a service can advertise a small fee, or even no fee at all, and still make more from you than a competitor who charges an honest one. They simply move the cost from the line you read to the line you do not.

Once you see this, the whole thing rearranges. The question is no longer which service charges the smallest fee. The question is which service gives you the rate closest to the real one, because that is where your money actually goes.

Now the harder part, which is that this is deliberately hard to compare. Every provider presents it differently, some loud about the fee and quiet about the rate, some the reverse. That is not an accident. Confusion is where the margin lives.

What is worth watching is that arrival number, not the advertised fee. Compare what actually shows up on the other end, and the marketing stops mattering.