My wife is going to the UK to attend a sports training course. The provider there requires advance payment. The cost is in British pounds. I need to transfer money over to cover it.
When I did an international money transfer from the U.S. to Canada a few years ago, CurrencyFair gave the best exchange rate. Since then, CurrencyFair pulled out of the U.S. due to regulatory requirements (they can still send into the U.S. but not out of the U.S.). OFX, previously known as USForex, came second at that time. I heard ads from a service called TransferWise in some podcasts. I decided to check them out and see which one can do the transfer at the lowest fee this time.
The fee for an international money transfer comes in two flavors. It can be an explicit service fee, and it can be a less-favorable exchange rate. You have to consider both the explicit service fee and the implicit markup on the exchange rate to get the total cost, especially when you are transferring a large amount.
TransferWise is based in the UK. OFX is based in Australia. Both have subsidiaries and proper licenses in the U.S.
For this round of tests, I tried scenarios where I wanted the other end to receive 2,000 Canadian dollars, 2,000 Euros, 2,000 British pounds, and 120,000 Indian Rupees. Whichever service can do it at the lowest all-in US dollar value wins. I got quotes from these services on the same day, within minutes of each other.
US Dollars To Canadian Dollars
| OFX | TransferWise | |
|---|---|---|
| Receive CAD | 2,000 | 2,000 |
| 1 USD = ? CAD | 1.3301 | 1.3544 |
| Fee | $0* | $14.77 |
| All-in | $1,503.65 | $1,491.44 |
| Effective fee | $26.98 | $14.77 |
TransferWise added an explicit fee to the exchange rate. OFX included part of their fee in the exchange rate. The effective fee is calculated as the difference between their all-in cost and the cost given by TransferWise before its fee.
TransferWise won this test.
US Dollars to British Pounds
| OFX | TransferWise | |
|---|---|---|
| Receive GBP | 2,000 | 2,000 |
| 1 USD = ? GBP | 0.8014 | 0.81437 |
| Fee | $0* | $20.88 |
| All-in | $2,495.63 | $2,476.77 |
| Effective fee | $39.75 | $20.88 |
TransferWise won again.
US Dollars to Euros
| OFX | TransferWise | |
|---|---|---|
| Receive EUR | 2,000 | 2,000 |
| 1 USD = ? EUR | 0.9405 | 0.95715 |
| Fee | $0* | $20.90 |
| All-in | $2,126.53 | $2,110.44 |
| Effective fee | $36.99 | $20.90 |
TransferWise also won.
US Dollars to Indian Rupees
| OFX | TransferWise | |
|---|---|---|
| Receive INR | 120,000 | 120,000 |
| 1 USD = ? INR | 66.4831 | 67.85495 |
| Fee | $0* | $15.92 |
| All-in | $1,804.97 | $1,784.40 |
| Effective fee | $36.49 | $15.92 |
TransferWise cost less.
* OFX was waiving its explicit fee this month when I did the test. Otherwise the fee would be $5 for transfers under $5,000.
Conclusion
When I tested transfers from US dollars to Canadian dollars, British pounds, Euros, and Indian Rupees, TransferWise had the lowest all-in cost. Its effective fee was nearly half of OFX. Consider using TransferWise when you need to do international money transfers. Because the fee is largely proportional to the amount you send, the more you send, the more you save when you use a lower cost provider.
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Mrs. Picky Pincher says
Huh. I don’t know if this is an option for you, but my bank offers international money transfers. The upside is that I don’t have to use a separate service, and I don’t recall them charging any fees. Anyhoo, there might be cheaper options out there!
Harry Sit says
Just try getting a quote from your bank. If the bank doesn’t charge an explicit fee, the fee is included in the exchange rate you get. When you transfer a small amount, say $100, you may not care much about the exchange rate. When you transfer a large amount, the percentage fee included in the exchange rate becomes quite large.
abc says
Other than costs, are there other factors to consider when picking a company for an exchange?
Assuming a credit card would be accepted for payment, how do fees and exchange rates compare for different credit cards? Is there a best?
Harry Sit says
Speed is factor, as KD commented below. Using a credit card can be an option if the receiving end accepts it and you have a card that doesn’t charge foreign transaction fees. It’s not an option for transferring to family or to your own account in another country.
Adrian says
Did you try Covercy.com?
Harry Sit says
I haven’t heard of Covercy.com until your mention. I just tried the same tests (Covercy doesn’t do USD to INR). The quotes were about $10-15 higher than TransferWise for sending 2,000 Euros, 2,000 British pounds or 2,000 Canadian dollars.
KD says
Harry, Thank you for the research. Indeed, Transferwise is the cheapest, no question. Another company that came close in rates was Xoom.com but it could not match Transferwise. Added bonus though was that to certain countries like India and a few in South America, Xoom offers instant transfers to specific banks or 4 hour-transfers during banking hours in recipient countries. This may not be of value when you are paying for a class etc. But it is extremely valuable option for folks who have family in those countries and may be need to help them in emergencies.
I guess the premium charged by Xoom seems to be for faster delivery. Transferwise has Skype founders while Xoom is a Paypal company.
Harry Sit says
I got quotes from Xoom but I didn’t include them here because except for transferring to India, Xoom’s effective fees were much higher in the other three major currencies.
KD says
Thanks for confirming that. I tried their instant transfer. By god, that was instant! I was talking on the phone with my relative and when I hit send. Next moment, my relative confirmed and also xoom confirmed that the money was delivered in the relative’s account. Wonders of modern technology! – even wires are not that fast, are they? I wish the US had something similar with ACH. Even though same day ACH was implemented in September 2016, many banks are loath to have this feature and want to charge a premium. Only Alliant CU touts it for their customers for free. I know xoom is technically extending/offering a small credit of day or two in exchange of a lower exchange price. But the sheer convenience of it and peace of mind is alone worth it.
lynnenyc says
Most of my international transactions are with companies, so I just use a credit card that doesn’t charge foreign exchange fees. (And hopefully the 2% cash back on a credit card helps mitigate what the credit card company implicitly steals from me on the exchange rate)
Out of curiosity, does Pay Pal work overseas? That might be an option for transactions with friends/family.
Harry Sit says
It works but they include a 2.5% markup in the exchange rate.
Charles Cohick says
if you have accounts in both currencies, you can use the Circle app to deposit money in USD and withdraw it in GBP for very close to the market exchange rate. Downside is the weekly sending limit, can be anywhere from $400 to $3000 in my experience. I’m living in the UK for the year and have used it to send GBP back home to pay bills easily and effectively.
GMShedd says
I’ve had a few such transactions over the years that required direct transfer to a bank account in another country. It seems the cheapest route changes over time, but at least it seems to be getting cheaper. This year, Transferwise also gets my nod. In addition to being inexpensive, it’s really quick and easy to use. In the credit card domain, in 2014, I found that the CapitalOne card with no foreign transaction fees used a very reasonable exchange rate for euros–within ~0.25% ($2.50/$1000) of the FX rate given by Yahoo Finance for the same days, making the “extra” costs for spending in other countries pretty insignificant.
Blue says
Fidelity has no fee for international outgoing wire transfers. The exchange rate might be competitive as well. Have you looked into it?
Harry Sit says
The exchange rate in its foreign currency wire had a 3%+ markup when I got a quote last time.
Miles Bemberg says
I agree that TransferWise is among the best options. The all-in fee is: 0.50% of the transaction value plus the small fixed fee.
However, InteractiveBrokers offers even lower rates. This is because you transact **directly on the forex market (no markup added)**. The fees therefore are effectively zero variable fees plus the transaction/account management fees (roughly $10 per month).
However this method can be completely overkill unless you are sending a substantial amount of funds (into the hundreds of thousands)
Harry Sit says
What happens after you trade into another currency with InteractiveBrokers? Can you send it to a third party or can you only withdraw to a bank account in your own name in the destination country?
Miles Bemberg says
I have used it to convert money and then send internationally (with no additional fees being incurred when sending the funds).
For example, you can deposit USD funds into an account at InteractiveBrokers in the USA, convert from USD to EUR (directly at the bid/ask spread), and then send EUR funds to a bank in Paris. When I have done it, the amount you send in EUR is the exact amount recieved in EUR (no fees/deductions)
MillennialPersonalFinance says
This is very helpful – I am planning on traveling for several months this summer and this really breaks it down. I have used Transferwise in the past because of its simplicity but I’m still looking into other options. Thanks for sharing!
Bruce says
I was told you can’t transfer money to a third party.
DJ says
Thanks for the research, Harry! This does help significantly!
Have you compared between the TransferWise Borderless Account and Zenbanx Multi-currency Accounts as well? It looks attractive, but I am unsure which other players offer such products, and whether or not it is wise to go with these offerings when all you want is to send money to another country.
Paul Bubendey says
Do you have any experience with a UK firm “Currencies Direct”? We are selling some property in Spain and will be paid in euros. We want to exchange the euros for US$ and have the dollars transferred to our USA account. They have offices in Spain and the USA.
bruce says
I have used commonwealth forex for years. Excellent, honest service, very low cost. Use the Providence RI office and ask for St. John. tel: 1 800 239 2389
Ruth says
Are Currencyfair’s exchange rates that are displayed on the start page realistic rates (assuming one has already transferred money inside the Currencyfair account)? It sounds like it’s between Transferwise and Currencyfair, and Currencyfair is still useful when receiving money in USD from oversees.