Don’t Trust Banks for International Money Transfers
The following is a Guest Post.
Don’t Trust Banks for International Money Transfers
Canadians transfer significant sums of money into and out of the country every year. The Vancouver Sun newspaper indicated in an Op-Ed from 2014 that remittances to the value of $24 billion a year were sent home from Canada. Thanks to a large pool of migrant workers and immigrants in the Metro Vancouver area and elsewhere, massive streams of international money transfers routinely take place in Canada. According to the World Bank at the time, the total value of global money transfers amounted to $529 billion, of which Canada made up 4.5% (latest available figures).
It is especially interesting to note that a Pew Research Center study confirmed that remittances sent by migrant workers and immigrants from Canada to their home countries is higher than for any other country in the world. Most of the countries receiving remittances from Canada include emerging market economies such as China, India, Philippines, Britain, France, Lebanon, Vietnam, Germany, Italy, and South Korea. For the most part, remittances are transmitted through banks and traditional financial institutions. Unfortunately, these are also the most expensive ways to send funds abroad. There are other more viable options available to people, including a burgeoning FinTech industry with money transfer companies like CurrenciesDirect.
What Sort of Fees to Banks Charge on International Money Transfers?
It all depends on the bank in question, however there are several upfront fees, hidden fees, commissions and spreads that banks charge on money transfers. None of these is designed to be in the client’s best interest. For starters, banks charge a wire transfer fee to send money from point A to point B overseas. These electronic transfer mechanisms offer security, and peace of mind, however it comes at a high cost. Various types of fees are factored into these types of international money transfers including:
- Tracer Fees
- Initiation Fees
- Outgoing International Fees
- Incoming International Fees
Consider the following outgoing international fees from major US Banks (Canadian banks offer similar costs).
- RBC (Royal Bank of Canada) – $13.50 per transfer however funds are only available in 2-5 business days
- Bank of America – $35 if sent in Foreign Currency or $45 if sent in USD
- BB&T – $65 for Outgoing International Fees
- Capital One 360 – No Outgoing International Money Transfer Services Available
- Chase Manhattan – $40 for Online International Transfers and $50 in Person
- PNC Bank – $45 for Outgoing International Fees
- US Bank – $50 for Outgoing International Fees
- Wells Fargo – $45 for Outgoing International Fees
Contrary to popular belief, it’s not the international money transfer fees that are the major cost component. It’s the spread. The spread determines the effective exchange rate that you’re paying as a result of the added costs tacked on by the bank. There is an official exchange rate, and an exchange rate charged by individual banks. Most banks offer highly unfavorable spreads to clients, since this is how they generate their profits.
Expect up to 2% + with many banks. This can add extortionary amounts to your money transfer costs, especially when you’re dealing with figures of CAD $100,000 or more. You could be looking at an additional $2,000 – $5,000 on 2-way transfers depending on the bank that you’re working with. Additionally, the bank costs, hidden fees, charges, and paperwork add extra layers of stress to the process. With international money transfer companies, you can expect the funds to be transferred at a much cheaper rate with instant access to funds.
Rather than waste time trying to unravel the gobbledygook offered by banks, there are many great options for Canadians, including CurrenciesDirect. This money transfer service has been in operation for 22 years and accepts 63 currencies. The minimum transfer amount is just $100, and you can make money transfers via telephone, email or online. With a variety of offices around the world. This FCA licensed authority is an excellent example of how to save big with international money transfers.
An estimated £4.5 billion (or CAD equivalent) is transferred every year. The company has racked up multiple awards over the years for Consumer Champion of the Year, Most Positive Client Reviews, National Business Awards Finalist and more. You wire funds domestically, and the funds are received domestically in the currency of that country. Rather than waste your time with expensive bank fees and charges, stick with reputable international money transfer organizations and keep more of what’s yours.
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Hey I’m Rob, creator of Passive Canadian Income.
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My mom often transfer money from Canada to our relatives overseas. I never really inquire about the fees, but I guess it not cheap. I know this because I was at a bank trying to exchange my Canadian dollars to Euros a few years ago. The spread was about 6%. I was floored because I get a rate of less than 1% for USD. I am glad that I don’t seen money overseas very often.
Its true Ive sent money to the Philippines and always get shocked with the fees.
The banks are making money in million ways. Glad that I own the bank stocks
I definitely enjoy my bank stocks