When you send a small amount of money overseas, you don’t care as much about exchange rate. The fixed cost is more important. After all it doesn’t make sense to spend \$25 on fees to send \$100. I had to send \$100 to Mexico a few years ago. I wrote about it in Sending a Small Amount of Money Overseas.

When you are sending a large amount of money to your own account or family or if the price tag of whatever you are paying for is stated in foreign currency, you should try to get the best exchange rate you can. A 1% difference in exchange rate on \$10,000 is \$100.

For this article I’m using as an example sending US\$10,000 from the US to Canada and converting to Canadian dollars. As I’m writing this, the exchange rate on Yahoo! Finance is 1 USD = 1.0524 CAD. I’m also assuming you have an account that gives you free wire transfers.

### Wire Foreign Currency

Banks can wire in foreign currency. Fidelity quoted me a rate of 1 USD = 1.018 CAD. That’s a 3.4% spread from the inter-bank rate. The recipient’s bank will also charge a fee for an incoming wire. For example Canada’s largest bank RBC Royal Bank charges C\$15.00 . If you send US\$10,000, the recipient will receive C\$10,165 net.

### Wire US Dollars

You can also wire US dollars and let the receiving bank convert into local currency. Using Royal Bank as an example again, its US dollar buy rate is 1 USD = 1.0195 CAD at this time. If you wire US\$10,000, the recipient will get C\$10,180 after a C\$15 incoming wire fee. It’s barely better than sending a foreign currency wire from Fidelity.

### Xoom

Xoom is a money transfer service company, publicly traded on Nasdaq. It charges \$4.99 for transfers up to \$2,999. To send US\$10,000, You will have to break it into 4 chunks of \$2,495. The exchange rate is more favorable at 1 USD= 1.0274 CAD.

Because it transfers Canadian dollars locally within the country by electronic funds transfer, not wire, the receiving bank won’t charge an incoming wire fee. After paying the Xoom fees out of your US\$10,000, the recipient will get C\$10,254. That’s better than using bank wires.

XE Trade is another international money transfer service. The transfers are done through Custom House, which is owned by Western Union. You wire money to Custom House or let them debit your bank account by ACH. Custom House then sends local currency to the receiving bank by electronic funds transfer.

XE Trade doesn’t show the actual rate until you create an account. I have an account. The rate is 1 USD = 1.0337 CAD at this time. If you send US\$10,000, the recipient will get C\$10,337. That’s better still than Xoom.

### Western Union Online FX

Speaking of Western Union, it offers a Western Union Online FX service for sending more than \$3,000. It also doesn’t display the actual rate until you sign up for an account. I’m curious whether the rate is better than XE Trade’s rate when they are both done by the same company Custom House.

### USForex

USForex is owned by an Australian company OzForex, which is majority-owned by Macquarie Bank in Australia. It offers similar service as Xoom and XE Trade. USForex can debit your bank account in the US by ACH before it sends money through a bank in the destination country.

Unlike XE Trade and Western Union Online FX, USForex shows the actual customer rate before you create an account. That’s great transparency. Its rate gets better as the size of the transfer increases. At this time for transferring US\$10,000, the rate is 1 USD = 1.0401 CAD, which is better than XE Trade’s rate.

USForex doesn’t charge any fee on top of the exchange rate spread for transfers over \$5,000 (\$5 fee for under \$5,000). If you send US\$10,000, the recipient will get C\$10,401.

### CurrencyFair

[Update: CurrencyFair suspended service to US customers as of Jan. 1, 2014. No word yet when the service will resume. See CurrencyFair Suspends Foreign Exchange Service for US Customers.]

I heard of CurrencyFair from blogger indexfundfan. CurrencyFair uses a peer-to-peer marketplace approach to drive the rate toward the middle. Read indexfundfan’s reviews: part 1 and part 2.

You wire money to CurrencyFair in the US; CurrencyFair delivers local currency in the destination country for \$4. At this time the exchange rate at CurrencyFair is at 1 USD = 1.0480 CAD. If you send \$10,000, the recipient will receive C\$10,476 net. That’s the best of the bunch. It’s within 0.5% of the inter-bank rate on Yahoo! Finance.

***

To recap, we have these spreads off the inter-bank rate for transferring US\$10,000 to Canada and converting to Canadian dollars:

 Method Exchange Rate Spread Foreign currency wire 3.4% US dollar wire 3.3% Xoom 2.6% XE Trade 1.8% WU Online FX ? USForex 1.2% CurrencyFair 0.5%

Between the most expensive option and the least expensive option, we are looking at a difference of \$300 on a \$10,000 transfer. If I need to transfer a large amount overseas, I would consider using CurrencyFair if it covers the currency I need.

Which service is the best also depends on the target currency. For example as I’m writing now Xoom and Western Union offer better rates in converting into Mexican Peso and Indian Rupee than XE Trade while CurrencyFair doesn’t offer service in either currency at all.

[Photo credit: Flickr user Mark Morgan Trinidad B]

Mortgage rates hit new lows. I saw rates as low as 3.25% for 30-year fixed, 2.625% for 15-year fixed, with no points and low closing cost. Let banks compete for your loan. Get up to 5 offers at LendingTree.com.

1. KD says

I have personally used Xoom to transfer money to India. The interface is so easy to use and setup. The exchange rate is transparent and known before the transaction is submitted. The money is transferred within 4 hours as advertized. You simply transfer the money in the evening here in the US (early morning in India) and when the banks in India open in a few hours, money is there! Indian banks are open on Saturday so you can even transfer on Friday evenings in the US. I really liked it. Plus no fees if you transfer over \$1000 from a US bank account. You can also use a credit card for additional fee. They also have an app – both on Android and iPhone. This is so handy esp. if there is an emergency. It remembers your past recipient which also saves a lot of time. Be sure to use a very strong password. Otherwise it could be easily abused if hacked.

In all it meets my following priorities: ease of use, ease of setup, transparent and guaranteed exchange rate, fast transfer, reliable delivery, low fees.

The rate is not top notch – but they say so clearly on their page, “* In addition to the transfer fee, Xoom also makes money when it changes your U.S. dollars into a different currency. Xoom rounds to the nearest whole rupee.”

2. Harry says

KD – Yes Xoom is quite good for sending to India. Right now it shows 1 USD = 66.3000 INR. It’s giving the best rate among the ones I reviewed here.

• Vishu says

Wells fargo is giving better rates from USD to INR. However,

1. First transfer is to be initiated by visiting branch
2. Exchange rate is much better than xoom.
3. If want to add any new reciever, need to visit branch.

But exchange rate is very good. almost 0.30 INR more per dollar.

3. Jason McNamara says

I used currencyfair.com a couple of times… It’s pretty cool and their customer support is spot on if you have any problems, not to mention I got excellent rates using their marketplace.

4. Sean O'Reilly says

I live in the UK (sterling) but have a house in Ireland (euro) where I spend some time when writing (and slowly doing up said house). I used to use Bank of Ireland for forex, but since it’s recent appalling record of incompetence and finagling I’ve started using Currency Fare for exchanging my sterling pension for euro funds when in Ireland. If I’m careful and patient and plan ahead I can usually get a better forex rate, and lower charges. I like the peer-to-peer concept and have been using CF for 3 years now with no problems. Highly recommended.

5. indexfundfan says

Thanks for mentioning my review of CurrencyFair. I have continued to use CF without issues.

If in the US, you can use ING (now CapitalOne360) to ACH the money to CF without any fee. The only fee you pay is when you withdraw the money to the destination bank.

• jc says

Hi indexfundfan,

I recently opened a currencyfair account and I’m now trying your suggestion of using ACH to transfer money from my Capital One 360 account to CF. However, when I try to add a link to CF’s account, it is giving me an error message stating that “We cannot add this personal checking account for you…” I am also seeing the following message on their external accounts tab:

“Your link must be a personal checking account, not a brokerage, money market or savings account – institutions put restrictions on these types of accounts that prevent electronic transfers…”

Have you encountered this? Could this be a new restriction that prevents ACH pushes to external accounts not owned by the Capital One 360 account holder?

6. Harry says

indexfundfan – It sounds like Capital One 360 is one of few accounts that do ACH without having you confirm the other account, which you can’t because you don’t own it. Do you need a reference number when you ACH out to CurrencyFair’s account? Or is it a virtual account individualized to only you?

7. indexfundfan says

There is no reference number but CF never have an issue matching the deposit to me.

I believe CF uses the ACH reference string to match an incoming ACH to me. If you do a sample ACH from ING to say Alliant, you can see how the reference string looks like. IIRC, the string contains either my name or ING’s account number. BTW, you need to provide ING’s account number to CF as well.

Also, it never hurts to always transfer in odd amounts. E.g. instead of transferring \$5000.00, I would transfer \$4986.37.

8. Don Bernstein says

I’ve used the Xoom and USForex in the past to send money to Thailand. I wasn’t overly impressed with Xoom. Their rates weren’t the best. It was hard to get a hold of anyone. But once you are set up, it is ok.

At USForex, I had to wire my money to them. That was a little tedious. Other than that though, I am pretty happy. They absolutely had the best rates. Even compared with CurrencyFair.

9. Ramon says

I’ve used Xoom and Xe without any issues. Sometimes one will have a better rate than the other so I always compare both. Wanted to give a try to currencyfair but they don’t have Mexican Pesos 🙁 !!!

10. Rick says

Currencyfair warning
Currencyfair are not currently regulated in any US state or in Canada for that matter. If anyone uses a service of an unregulated entity they risk having their funds frozen while that state fines the entity trading in that state.

We have regulation in the us for a reason, to protect the public. Always beware of any company trading without such regulation. While you may be quoted better rates than your bank you have none of the protection.

• Harry says

Maybe that’s why CurrencyFair suspended service to US customers. They want to become regulated before they start doing business in the US again.

• B Chin says

As a US citizen who has lived and worked overseas, I have had it absolutely rubbed that the IRS and the congress view all foreign accounts with suspicion, so much so that they make life hell for US citizens overseas and the banks that do business with them. (Google FATCA and PFIC if you want to know more.)

Clearly the IRS wants to stop people hiding money overseas, but they go so far in their extremes that it is sometimes impossible for a US citizen to get certain banking services abroad. For example, when I left Canada in Sept 2013 no bank was willing to open a self-direct retirement account to hold my Canadian pension unless I moved back to Canada, and US citizens living in Britain are ill-advised to get any sort of mutual fund.

11. Rick says

If that were the case they would have stopped handling Canada too.
It’s more likely were forced to stop but who knows , the point remains to be careful with who you use, regulation would at least give security

12. Shane Mannerheim says

Too bad Currency Fair isn’t legal in the U.S. I am tempted to give them a shot based on Harry’s recommendation. I have used USForex 3 times now in the past six months. Like Harry mentions, they tend to be pretty competitive. They also set up ACH so I didn’t have wire the money in anymore. Unless I see some crazy discounts in the spread from another company, I am probably staying with them.

13. Ed Burke says

I just used USForex on 02/27/2014. They now can debit your account through ACH.

• Harry says

Thank you for the note. I updated the article.

14. Seth says

Xoom has a really low limit. It won’t work for sending 5 thousand to Ireland.

15. Stuti says

Xoom is great. I can send to Punjab National Bank or to an HDFC account and the money gets there in less than a minute. Have had a great experience so far!

16. Joon Mo says

Just used the the USForex company. So far, so good!

17. B Chin says

I love CurrencyFare.

I’ve been using XE Trade for the last 15 years. I was recently burned when funds were transferred to Colombia from the States. The transaction was locked in at a pretty reasonable rate, when the funds hit Colombia, the Colombian bank said there were insufficient funds to allow the transfer to proceed. The bank blamed Xe Trade and XE Trade blamed the bank. After 15 years of reliable service, I’m going to give Currency Fair a shot and see if I have any better luck with the Colombians.

19. Alex says

Did you try transferwise.com ?
It is better if you send small amounts.

20. Mano says

Hey all,

Have you checked xoom.com lately? Xoom is now offering best exchange rates ever to India on top of its instant money transfer service – one more reason to try Xoom. I highly recommend it.

21. Carl says

I transfer money form the U.S. To the UK every month, thumbs up for transfermate.com , same day transfers and I can reach them any time of the day by phone