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 = 1.3126 CAD. If you don’t have an account that gives you free wire transfers, you will have to pay a foreign wire transfer fee to your bank.
Wire Foreign Currency
Banks can wire in foreign currency. Fidelity quoted me a rate of 1 USD = 1.2680 CAD. That’s a 3.4% spread from the inter-bank rate but there is no wire transfer fee from Fidelity. The recipient’s bank can 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$12,665 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 = 1.2742 CAD at this time. If you wire US$10,000, the recipient will get C$12,663 after a typical $50 foreign wire transfer fee from your bank and C$15 incoming wire fee from the receiving bank. It’s about the same as sending a foreign currency wire from Fidelity.
Western Union Online FX
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. The rate I got after I registered was 1 USD = 1.2579 CAD. This rate was the worst so far.
Xoom
Xoom is owned by PayPal. 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 slightly better at 1 USD= 1.2756 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$12,731. That’s better than using bank wires.
XE Money Transfer
XE Money Transfer is another international money transfer service. You wire money to XE or let them debit your bank account by ACH. XE then sends local currency to the receiving bank by electronic funds transfer.
XE Money Transfer doesn’t show the actual rate until you create an account. I have an account. The rate is 1 USD = 1.2866 CAD at this time. If you send US$10,000, the recipient will get C$12,866. That’s better still than Xoom.
OFX
OFX, formerly known as USForex, is operated by the Australian publicly traded company OzForex Group. It offers similar service as Xoom and XE Money Transfer. OFX can debit your bank account in the US by ACH before it sends money through a bank in the destination country.
OFX’s rate gets better as the size of the transfer increases. At this time for transferring US$10,000, the rate is 1 USD = 1.2946 CAD, which is better than XE Money Transfer’s rate.
OFX 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$12,946.
TransferWise
TransferWise is based in the UK and licensed in the U.S. It offers similar service as OFX. TransferWise debits your bank account in the US by ACH before it sends money through a bank in the destination country.
TranserWise says it uses the “real” inter-bank exchange rate with an explicit fee on top. This provides transparency. You also don’t need to register before you see the rate. At the same time I requested the rate quote, the rate from TransferWise after its fee was 1 USD = 1.3025 CAD, which is better than OFX’s rate. If you send US$10,000, the recipient will get C$13,025.
***
To recap, if you send US$10,000 to Canada, your recipient will receive vastly different amounts depending on which service you use:
| Method | Received Amount |
|---|---|
| Western Union Online FX | 12,579 |
| Foreign currency wire | 12,665 |
| US dollar wire | 12,663 |
| Xoom | 12,731 |
| XE Money Transfer | 12,866 |
| OFX | 12,946 |
| TransferWise | 13,025 |
Between the most expensive option and the least expensive option, we are looking at a difference of over $300 on a $10,000 transfer! If I need to transfer a large amount overseas, I would consider using TransferWise or OFX 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 is competitive in transferring to India in Indian Rupees.
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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.”
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.
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.
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.
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?
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?
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.
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.
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 🙁 !!!
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.
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
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.
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.
Seth says
Xoom has a really low limit. It won’t work for sending 5 thousand to Ireland.
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!
Joon Mo says
Just used the the USForex company. So far, so good!
B Chin says
I love CurrencyFare.
Brad says
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.
Alex says
Did you try transferwise.com ?
It is better if you send small amounts.
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.
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