Communicated Content – While the business world has become increasingly globalized, banks around the world have failed to keep up. In 2022, it remains expensive and complicated to send money abroad. This is true in just about every country, at least if you’re using a traditional bank. However, the latest figures indicate that nowhere is quite as expensive for international wire transfers as the United States.
The clearest indication of this is seen in the international wire fees by US banks. But the costs do not end there. Let’s take a look at what the data tells us about money transfer costs around the world, and how the US is particularly expensive.
What are international wire fees?
When sending money from a local bank to a bank in another country, it is not as simple as it is to make domestic payments. On the contrary, you need to use what is called a wire transfer. In 2022, this generally means using the SWIFT network or similar. SWIFT transfers are expensive for banks to facilitate, and they pass the cost on to the customer.
SWIFT fees with traditional banks can be as much as US$50 in the United States. This is a flat fee you will pay even on small transfers. So, while someone sending tens of thousands of dollars may not be too concerned about a $50 fee, it is very significant when making smaller transfers.
While the cost of a SWIFT transfer is highest in the US, this does not mean banks in other countries are cheap. Rather, their SWIFT transfers everywhere come with high flat fees.
But if we were just concerned about the SWIFT fees, people sending big transfers might not be bothered. However, there are added fees you need to know about.
Exchange rate markups
It is frustrating that banks quote high fees for SWIFT transfers, but wire costs are expensive to facilitate. This fee is actually not the main way that banks make money off international money transfers. Rather, they add markups to the exchange rate.
If you’ve sent money abroad before, you may have noticed that the exchange rate the bank gave you was not the same as the rate you found on Google. This is not because Google’s rate is inaccurate but because you are paying fees to the bank hidden in the exchange rate. This is a common practice in banks around the world and has a significant impact, especially if you are sending large amounts.
Once again, the US is particularly expensive when it comes to markups in the exchange rate. US banks charge an average markup of 2.75% on the exchange rate. This is higher than everywhere other than Australia, where you will be charged a whopping 3.5% average markup. The flat fee you pay in Australia will be less than what you pay in the US though.
It is tough to understand the actual implications when dealing with percentages, so let’s look at a quick example. If you are sending $10,000 to Europe, with a 2.75% markup on the USD to Euro rate, you will pay approximately $300 in fees.
If this was a once-off fee, you may still not be bothered by it. But if you’re making monthly transfers with the USDEUR rate, the fees become significant very quickly.
Some banks do work out a lot cheaper than others. While Wells Fargo charges $30 for money transfers, US Bank charges a flat fee of $50. US Bank also charges $50 for transfers from foreign currencies to US dollars, while other banks charge less (or even no fees) for incoming transfers.
Are big banks dinosaurs?
The inefficiency and expensive nature of international transfers through big banks is another sign that these banks are dinosaurs. They are relying on the stature they’ve built over decades (or even centuries). They have not modernized nearly enough, considering how much the financial world has changed over the past few years alone. Still, they’re not going anywhere anytime soon. That doesn’t mean you have to use them for everything though.
Considering how expensive money transfer costs at a US bank are, alternative providers have become popular in recent years. These providers use methods other than the SWIFT network, charging low fees and giving you an exchange rate close to or the same as the mid-market rate you’ll find on Google.
Money transfer costs through private providers
If you do need to send money abroad from the US (or to receive payment from abroad), you should consider using a private money transfer company like CurrenciesDirect or Wise. They offer an online service and will process your transfer quickly and at low rates. They are also far more transparent about their rates than traditional rates. You can get a quote without signing up in most cases.
The reality is that sending money internationally is only expensive when going through a bank with traditional international wire fees. Modern payment methods are cheap and align far more closely with the increasingly globalized business world.