In this article, we will be discussing the costs and transaction fees (sometimes hidden fees and charges) that are associated with transferring money. We will be comparing three of the lowest cost and largest services.
Currencyfair, Transferwise, and OFX Fees
You are probably already aware that you can save a lot of money when you send money abroad by not incurring international bank transfer fees – frequently more than 5% including all of the additional fees.
This article will compare money transfer providers costs and fees for OFX as well as CurrencyFair and TransferWise, two peer-to-peer rivals, which are leaders in international money transfers alongside the likes of Western Union etc. The good news is all these providers have global reach and are authorised by the Financial Conduct Authority (FCA) in the UK and regulated by the financial institutions in other countries.
TorFX and WorldFirst are two other reputable services that have similar cash transfer fee structures to that of OFX. For more information on these money transfer companies, click here to read the TorFX review.
4 Ways to Save Money
There are four different ways that you can spend or save on costs when you are transferring money. First is the bank’s sending fees, second is the money transfer provider’s fee, the third is the exchange rate, and finally, there is a receiving fee that is charged.
1. Sending Fee
The sending bank can charge this fee depending on what method you use for sending money for funding the transfer. That fee has more to do with the bank and method you use and little to do with what service you select.
Important tip: Find out what options your bank has available for the money transfer service you are using and then see which has the best option for how much money you would like to transfer.
2. Transfer Fee
This is a small fixed fee usually.
3. Foreign Exchange Rate
Usually a percentage of the interbank or mid-market rate.
4. Receiving Fee
The receiving bank charges a fixed fee and can be quite high (up to £30 or $50USD although normally it is about half of this). Money transfer company ty to cut this fee down to zero by holding bank accounts in receiving countries. That allows them to pay into their receiving bank account in the same way that a local would – with no fees. However, this isn’t always possible since transfer companies work with hundreds of different countries.
Important tip: Select larger and established services to send money online such as CurrencyFair, TransferWise, WorldFirst, and OFX due to their larger reach they often have bank accounts in many receiving countries.
Before reading further, click here to read an in depth OFX review and compare to other money transfer providers. A $15 transfer fee is charged by OFX for transfers online in some countries when transactions are less than £5000 or $10,000. No fee is charged for transactions that are more than that. The exchange rate fee is on a sliding scale from 0.6% up to 2.0%. The percentage is reduced as the transfer amounts increase.
You can avoid paying a transfer fee forever if you would like to use OFX.
You are only shown the rate offered by OFX once you sign up, so we logged into our own account to provide you with this chart.
Bottom Line: According to our common currency test, the cost is 1% for amounts larger than around €5000/£4000/$7500 and reaches to 0.68%.
Peer to Peer (P2P) Services – CurrencyFair and TransferWise
In the P2P transfer service world, TransferWise and CurrencyFair are leaders when it comes to international transfers. The P2P model matches up customers who would like to transfer one currency into a different currency, with individuals wanting to execute the opposite transfer.
The matching service helps to ensure the money does not cross any borders which allows you to save a lot of money on their transfer fees. That makes the P2P model potentially quite inexpensive.
However, there are limitations to the P2P model as the amount increases for currency transfers since matching becomes more difficult and causes costs to increase which results in the services stepping in to get the transactions completed.
Click here to read an in depth TransferWise review and compare to other money transfer companies. TransferWise is transparent when it comes to fees and exchange rate you are charged by displaying the interbank or mid-market rate after which it charges a flat fee along with a percentage on the exchange rate that is shown prior to you signing up.
Transfer Fee: A Fixed fee of 50p up to £2 or its equivalent amount.
Currency Exchange Rate Fee: Ranges from 0.5% up to 1.5% of the total amount depending on the currency pairs
Extra Fees: In addition to convenience, using credit and debit cards also have the advantage of being able to save you one or days when it comes to the speed of the transaction due to the fact that TransferWise obtains funding for the transfer almost instantaneously. However, fees are charged by credit and debit cards to TransferWise which they then pass on.
Important tip: Avoid having to pay the extra fees by using either direct debit or a similar method with your bank account.
The second important tip: Use the tool that is provided that gives you a quote and will show you the exact amount of fees you will pay.
Bottom Line: The amount of the fees you pay will vary greatly in percentage terms. However, for smaller amounts of less than around €5000/£4000/$7500 in major current they might be your best option.
An exchange rate fee and fixed flat fee are charged by CurrencyFair.
Transfer Fee: HK$25, $4, £2.50, €3
Exchange Rate Fee: Ranges from 0.25% up to 0.6% depending on the ability to match transfer funds and on the currency pairing.
CurrencyFair charges 0.3% or 0.25% of the total amount that is exchanged on both sides when customers match one another (depending on the specific currency). If there is not a “peer” on the other side to exchange funds with, then Currency Fair steps in to complete the transaction. That results in a charge of 0.4% up to 0.6% of the total amount exchanged (depending on what the currency pair is).
So depending on the way you are exchanging, and what the activity in the market is at the time, normally you will pay 0.25% up to 0.6%, and a fixed amount of $4, £3, €3.
Important tip: It is easier to match more common currencies and smaller amounts which has a tendency to result in total costs that are very competitive. Although CurrencyFair is not as transparent about the fees it charges as TransferWise (until you sign up), they are quite competitive.
Third-Party Bank Fee (covered below) normally will not be as much of an issue with OFX or TransferWise due to their international reach.
How to Save Money
Each of the money transfer companies above has been for their low-cost fees. Those companies are definitely are all going to provide a big cos saving compared to transferring money through a bank.
However, to directly compare them, all of them are very different depending on which method you use for funding the transfer, countries and banks you are dealing with, amounts, and currencies.
Usually, P2P services will be the most inexpensive option to use on smaller amounts less than €5000/£4000/$7500 for common currencies such as USD, EURO, GBP, CAD, AUD, and NZD.
For larger amounts over €5000/£4000/$7500 and currencies that are less common, the differences will be minimal and there will be more important factors in play.
If you would like to squeeze every cent out, you need to make comparisons on an individual basis. The easiest way to do this is to enter the currencies and amount into TransferWise’s tool (which is really transparent when it comes to total fees) and then compare them with the OFX chart (if you are dealing with mainstream currencies such as USD, EURO, GBP, AUD, CAD, and NZD).
Third-Party Bank Fees
One other important aspect that you should consider is the international bank transfers fees that are charged at both ends by the banks. Large money transfer services such as these maintain bank account networks all over the world which allows you to receive and send money to them as inexpensively as possible.
The least expensive service, of course, is not always the best. Often customer service, speed, security, and safety are all legitimate concerns. CurrencyFair, TransferWise, and OFX all are strong contenders when it comes international money transfer companies.