Unfortunately, this method of sending money back and forth is neither efficient nor cost-effective. For starters, bank wire transfers are expensive and time-consuming.
Banks and financial institutions typically charge high fees for outgoing wire transfers, and receiving incoming wire transfers. The cost is oftentimes split between the sender and the receiver, or the receiver can bear the full responsibility of the wire fees.
Wire transfers are possible within a country (between banks), or between banks in your home country and abroad. That’s where things get really interesting: International wire transfers are expensive. In fact, various studies have concluded that banks charge extortionary fees on overseas wire transfers. Typical fees can range between $25-$50 in the United States, and between £10-£25 in the United Kingdom. And the truth is that banks are on the hook for virtually nothing in terms of what they pay in SWIFT (Society for Worldwide Interbank Financial Telecommunications) fees. Analysis of the fees charged by banks across the United States and elsewhere reveals some interesting statistics:
- Bank of America charges a $15 wire fee for incoming domestic wires and a $30 outgoing domestic wire fee. The incoming international wire fee is $16 and the outgoing international wire fee is $35 in foreign currency and $45 in USD
- BB&T charges $15 wire fee for incoming domestic wires and $25 for outgoing domestic wires (except for Indiana, Kentucky, Texas and Ohio where the fee is $24). The incoming international wire fee is $18 and the outgoing international wire fee is $65.
- Chase Bank charges $15 for incoming domestic wires and $25 for outgoing domestic wires. There is a $15 fee for incoming international wires and an outgoing international wire fee of $40.
- Wells Fargo Bank charges clients $15 wire fees for incoming domestic wires, and $30 for outgoing domestic wires. The incoming international wire fee is $16 and the outgoing international wire fee is $45.
The reason that banks charge less for domestic wire fees is that they go through only a single payment system. This is a cheaper way to transfer money and a more efficient way to transfer money. When international wires are conducted, there are multiple banks involved and the process is a lengthy one. It typically involves a US-based bank and a foreign-based bank. It is interesting to point out that online bank transfers are far more cost-effective to clients than in-bank money transfers. Much the same is true of once-off money transfers versus recurring money transfers.
Is There a More Efficient Way to Transfer Money Abroad?
When it comes to processing international currency transfer services, there are many more cost-effective alternatives available to customers. With traditional banks, exchange rates can be between 1% – 2.5% more than the mid-market rate for popular currencies. Plus, traditional banks can also charge fees 5% over and above the mid-market rate for exotic currency pairs. It should be noted that the banks are generating pure profit from these types of activities. Plus, the sheer size of multinational banks allows them to purchase Forex at less than 1 pip markup, yet their fees are extortionary. There are many other service providers offering cost-effective ways to send money abroad.
These include WorldFirst International Payments, TransferWise, Currencies Direct, CurrencyFair, torfx, MoneyCorp and many others. It is important to evaluate the services provided by these money transfer companies to understand the minimum transfer amounts, wire fees and whether they use personal dealers. Each currency transfer service is also best suited for personal, property or business-related transfers. As always, it is important to ensure that the company you use is fully approved by the Financial Conduct Authority (FCA) of the United Kingdom. Further, they should be registered with the HM Revenue & Customs Office.