Transferring money overseas is a multi-billion dollar industry. In fact the World Bank also estimates that remittances to low and middle income countries (LMICs) alone will reach $442 billion by the end of 2016.
The Australian figures are a little more modest, but we still transfer in excess of $2 billion overseas each year.
When exchanging many thousands of dollars into a foreign currency, in most cases the exchange rate is going to be the biggest hit to your transfer. And we’ve certainly seen some currency volatility across the globe this year, what with economic struggles, BREXIT, Trump jitters and lacklustre business confidence.
People send money overseas for different purposes, from infrequent small amounts to larger daily amounts including:
Ways to transfer money overseas
There are several different ways you can transfer money overseas, including by phone, online, in a branch or via your mobile.
A majority of the 19 international money transfer platforms that CANSTAR has rated in 2016 allow you to do online transfers and in-store at a branch. Via phone and on mobile were less common, as follows:
|Arab Bank Australia||No||No||Yes||No|
|Bank of Melbourne||No||Yes||Yes||Yes|
|Bank of Sydney||No||Yes||Yes||Yes|
International Money Transfers Star Rating 2016
What does it cost to transfer money overseas?
There are costs to transfer money overseas – read about the main costs here.
In addition to costs such as sending and receiving fees, there is also another significant – and generally most important – cost that can be easy to overlook: the exchange rate.
It’s important to understand that the exchange rate is the hidden cost of transferring money overseas and is often where the currency suppliers make most of their money. These costs arise from the margin that has been applied and built into the currency broker’s quoted exchange rate on top of the true exchange rate. This margin can vary considerably between banks and foreign exchange brokers, so when transferring many thousands of dollars into a foreign currency it pays to shop around.
As an example, the table below shows the average exchange rates for the 19 international money transfer platforms in our 2016 rating, captured over four weeks and then averaged. This is compared with the RBA headline rate averaged over the same period to show the difference between quoted rates and the rates eventually applied to consumer’s international money transfers.
|Currency||Average RBA (Headline Rate)||Average Quoted Rate from Institution (Selling Rate)||Difference||Margin (%)|
|NB: The RBA apply the mid-points of buring and selling rates as the published/head-line exchange rate. Margin rounded to 2 decimal points.
The exchange rates for the 19 institutions in our rating are captured over 4 weeks and then averaged over the prescribed period (15 August 2016 to 8 September 2016)
So what does that equate to in dollars? The table below outlines the cost of exchanging $100,000 at the highest exchange rate and at the lowest exchange rate of the platforms assessed for Canstar’s 2016 ratings report, within the specified timeframe.
|Currency||Highest Quoted Rate (Selling Rate)||Lowest Quoted Rate (Selling Rate)||Difference on a $100,000 transfer|
|NB: The exchange rates for the 19 institutions in our rating are captured over 4 weeks and then averaged over the prescribed period (15 August 2016 to 8 September 2016)
Hot tip: A little bit of homework goes a long way when it comes to exchange rates and transfer fees, so you should compare your shortlist of institutions before picking one. Every institution costs something, but you can make sure that more of your money goes where it should – to your recipient, not your institution.
— CANSTAR (@CANSTAR) November 8, 2016