The best tips to reduce fees with overseas bank transfers
The Royal Commission’s final report shattered any trust we might have had in the Big Four. It wasn’t really surprising to most that they turned a blind eye to money launderers, rigged interest rates and inflated housing prices to unreachable heights.
However, their biggest scandal of all: the excessive fees and rates they’ve passed off as normal. Just look at their foreign exchange rates. According to the Commonwealth Bank of Australia, sending 1,000 AUD gets you 639.96 USD, if you use their AUD/USD rate of 0.6396.
But if you look at XE.com – the interbank rate for AUD/USD is 0.6756. If you were able to change money at that price, you’d receive 675.60 USD – 5.3% more!
For the longest time, banks swore their rates were competitive. With online money transfer companies charging exchange rates within an inch of interbank, banks are simply taking whatever they can.
I deal a lot with friends, family and business overseas. This article will focus on sending money from here to there, not international travel. Saving fees on bank fees when travelling internationally I’ll write about separately.
All information is correct at time of writing. Fees and charges may change.
Online Money Transfers Are Safe And Easy
More people are hearing about how online money transfer companies are beating the banks. As shown above, firms offering a rate close to interbank can save you approximately 5% on margins alone. When you factor in fees, the difference becomes even more stark. Since I deal a lot both personally and professionally with sending money overseas, I have looked at different options to reduce my fees.
I’ve known about companies such as Transferwise for a while but I know many Aussies still have concerns about non-bank providers. You know the saying, better the devil you already know… Well, inertia, as it turns out, is a powerful force.
Whenever I am looking at anything, I research the best prices, check reviews and ask friends and family so I can make an informed decision. A quick look online will show hundreds of thousands of positive reviews, exactly what you will pay in fees etc. It is obvious, the Big Four aren’t the White Knights of finance, as the Royal Commission has shown us.
How Are They Held Accountable?
There are viable alternatives – ASIC, or the Australian Securities and Investments Commission, regulates all of them. This watchdog compels service providers to safeguard client money, advertise honestly and to offer a minimum standard of customer service. As such, you can trust any firm approved by ASIC with your business.
How Fast And Easy Is It?
Compared to the banks, online money transfer firms also offer a superior experience. Their apps are easy-to-understand and straightforward, allowing you to complete the transfer process in less than five minutes. For instance, let’s say you wanted to move 500 AUD to your niece’s bank account in New Zealand.
You start by selecting currencies and entering the amount to wish to transfer. At this point, you’ll begin to see the value that online money transfer firms provide. Between the conversion windows, you’ll see the rates Transferwise charges whereas Banks often hide what they charge.
Also, they have a button (Compare Price) that has upped transparency to new heights. This option allows you to see how their price compares to competitors. You can easily see if they are the cheapest, something banks don’t do.
How much can you expect to save versus the banks?
If we crunch a few numbers, you might be surprised by how much you can save. Let’s start with fees. To send money abroad with Commonwealth Bank, you’ll pay 22 to 30 AUD, depending on how you initiate the transfer.
On Transferwise, you pay a flat 0.5% fee on the amount sent. Remember your niece in New Zealand? To post 500 AUD, you’d pay 2.50 AUD with Transferwise instead of 30 AUD with Commonwealth Bank. Better yet, some online money transfer firms charge NO fees. OFX, TorFX, and XE are just a few that have this policy.
And then, there are exchange rates. It’s on this charge where banks are the most dishonest. Some offer deceptively low fees, only to provide a disgustingly lousy exchange rate. For instance, Westpac offers fees as little as 10 AUD to send cash online. However, they offer an AUD/NZD rate of 1.0171 – contrast that with 1.0567, the rate Transferwise offers. That’s a spread of 3.7%!
Using the 500 AUD send, here is the difference, step-by-step. By going through Westpac, you’ll pay 10 AUD upfront. With Transferwise, 2.50 AUD. Then, the conversion. Your niece would get 508.55 NZD via Westpac, and 528.35 NZD with Transferwise. In total, your niece would lose out on 20 NZD and you’d pay 7.50 AUD more if you went with Westpac.
Now, imagine you’re an expat who sends money home monthly. Or, a business that repatriates e-commerce revenue weekly. Over time, these fees and large exchange margins would cost you THOUSANDS.
Why TorFX might be your best option for money transfer in Australia
What if you’re an entrepreneur, like me? Using a service like Transferwise could save you a bundle versus the Big Four. However, there are better options out there for B2B transfers.
In my opinion, TorFX is one of the best business-focused money transfer firms. Sure, Transferwise has exchange rates that match the interbank rate. When it comes to fees, though, they shine. Unlike their competition, they offer FEE-FREE transfers with other benefits.
For one, you can access a dedicated manager. These experts will assist in a variety of matters, like timing transfers to avoid geopolitical risk. On top of this, you can also make use of Forex tools, like forward contracts. This option allows you to lock in a rate for a transfer slated to take place in the future.
TorFX has a sterling reputation in Australia. The vast majority of their customers have reported positive experiences with this company. From excellent fees to fast delivery times, they get the essential things right.
Need more info? Give this TorFX Australia review a read.
Leave the Big Four behind
The Royal Commission pulled back the curtain from the Big Four, exposing them for who they are. For too long, they have been focused on maximising profit, by any means necessary. In doing so, they abused the trust of the public but it’s not the 1920’s anymore, we have options.
Despite being exposed, they continue to charge extortionate rates and fees. You do have a choice – scores of peer-reviewed money transfer firms, all with lower costs, are available online. Try at least one of them out – if you do, you won’t ever go back to the banks.