Understanding Fees Associated with International Money Transfers
It is an unavoidable frustration that moving your own money from one country to another will cost you some of that money. Some services are more transparent than others about the process, but it can still be a little annoying to need to pay some ambiguous “fees” without really knowing where your money is going. For this reason, we are going to look into the various expenses associated with international remittance.
It’s worth noting, before we start, there are two main formal means of transferring money across international borders. We have covered the informal methods and the many disadvantages that make them fundamentally impractical in a previous post. Of the two formal approaches, we will focus our attention on SWIFT transfers, which we’ve also explained in more detail before. The second option, SEPA, is only used for transfers within the eurozone, which is not relevant for transfers in and out of Thailand, as provided by DeeMoney.
What are the different types of fees involved in international transfers?
There are three types of fee that may be applied during an international transfer - one each for the three stages of a transfer. These are:
- Sending fees
- Receiving fees
- Conversion charges
Sending fees are transfer handling and processing fees charged by the money transfer service selected by the sender. They are paid by said sender. Effectively, this is a service charge for using the services set up by the transfer company. Different companies charge different fees, and the rates may change depending on the sender’s location, the receiving destination and the chosen methods of payment. These fees tend to be higher when sending money internationally through a bank than they are through independent remittance firms.
Receiving fees are commonly added by banks, though are much less common among independent remittance firms. This fee pays for much the same services paid for by the sending fee, but for the office at the other end of the transaction. Again, it is effectively a service charge that pays for the remitted funds to be processed and passed to the receiver. It is the receiver who will generally pay this charge.
Conversion charges are a less obvious fee than the previous two. This is the charge for changing the currency sent to the currency received, such as changing Thai baht into British pounds, US or Australian dollars, Indian rupees or any other world currency. This amount may vary wildly, depending on the destination currency and the current exchange rates, which fluctuate constantly. The extent of the conversion charges can also vary from one remittance company to another.
How are fees calculated?
All three of the fees mentioned can vary significantly depending on the country your money is being sent from and to. This is a result of the SWIFT system, which is a complex web of agreements and trust between national banks spread around the world. Some will happily receive funds from or transfer them into one country but not others, meaning your money may need to take the long way around to get where it’s going. Each transfer adds to the cost of the transaction, which adds to the fees you will need to pay.
However, that does not explain why you can sometimes be charged different amounts to send the same amount of money from the same origin and to the same destination. How come different companies can charge radically different fees for what is ostensibly the same transaction? The constant fluctuations of exchange rates is partially responsible for this difference, but there are also the different ways in which fees can be calculated.
Some companies, such as DeeMoney, charge a flat rate for each transaction while others calculate the fee as a percentage of the amount of money being transferred. Fees will also differ based on whether or not the institution charges a receiving fee at all.
How do I avoid paying fees?
Exactly how much you will end up paying to transfer your money depends on who exactly you choose to do the transferring. Banks are rarely set up for small and rapid cash transfers, being more used to moving larger sums. That being the case, they frequently have significant sending and receiving fees as well as conversion charges calculated as a percentage (typically around 3-5%), which can make the whole transaction very expensive.
By contrast, money transfer specialists generally do not charge a receiving fee and can sometimes keep the sending fees low by using a flat rate (again, this depends on which company you use). Best of all, their conversion charges are often significantly lower than those of banks - sometimes 60-70% less, in fact.
There are some money transfer companies that promise absolutely no fees. However, if you think they’re going through the complicated process of sending money across international borders out of the kindness of their hearts, you are sadly mistaken. Instead, they will generally take their profits through ambiguous conversion charges. This may be concealed quite easily by the company using a currency exchange rate slightly different from the official, correct rate. This means that you receive slightly less of the remitted funds than you would have done in a direct transfer at the official rate, with the excess going to the money transfer company.
Does paying less mean I’m getting less?
The reduced fees do not at all impact the effectiveness of the transfer. Indeed, remittance companies are mostly set up to provide near-instant transfers compared to the multiple days it can take for banks to complete the same transfer. Additionally, money transfer companies are closely regulated and have multiple safeguards in place to protect the sender’s money. It can often actually be safer to send your funds through a money remittance company than through even the most prestigious of banks.
This conclusion begs the question of why anyone would ever even think about using a bank to transfer funds overseas. The one advantage they have is the ability to scale up the whole process. While small personal transactions are easy to complete through services like DeeMoney, businesses transferring millions of baht around the world will find that banks are better set up for such large-scale transactions.
How do I get the best deal on international money transfers?
Unfortunately, there is no better way to make sure you’re getting the best deal than by comparing the different rates available and the services each provides. Note that, while some companies may have a slightly higher rate than others, they may also offer a more convenient service, justifying the extra cost. Remember, also, that some fees can be hidden in the process of converting currencies, meaning that there is a big difference between claiming to have no fees and actually charging no fees.