International money transfer – Foreign exchange hidden fees

Whether you are sending money overseas to your beloved ones regularly or if you are transferring money across to a foreign country for settling a transaction, you have to admit, things are much easier these days…relatively speaking.

Relatively easier, in the sense that you have a lot more options today than just your neighbourhood bank or that corner store with the Western Union kiosk. Having said that, it still remains a huge challenge to figure out the cheapest possible currency exchange provider. There are a number of costs involved in transferring money overseas – some obvious, some very hidden!

These costs can appear primarily in one of two ways – a ‘transfer’ fee, which is typically a flat fee, and an ‘exchange’ fee, which is the hidden fee. Let’s dig a bit deeper into why the hidden ‘exchange’ fees is critically important to you.

This is how it works. Say you want to buy US dollars with the NZ dollars you have with you. The bank or money transfer provider will set a price, or an ‘exchange rate’, for this transaction. For instance, today they may quote you a price of 0.67 for NZD vs. USD. This means that they are willing to exchange (give you) US$67 for the NZ$100 you give them.

Now remember, the bank or the provider themselves has to buy the US dollars first to give to you (in exchange for your NZ dollars). They make money when they buy the foreign currency at a cheaper price than they sell it to you at. The difference between what they buy it for and the price they sell it to you is the ‘exchange’ fee.

So using the same example as above, if they can buy US dollars at 0.69 today it means that they can spend the same NZ$100 and recieve US$69 – which is $2 more than they are willing to give you. That works out to a profit of 2% to them, in effect a 2% cost to you.

As you can see this cost to you is not an explicit ‘fee’, but is a cost that is embedded within the ‘exchange rate’ they quote you.

On a $100 it may look pretty insignificant, but considering it’s a percentage figure, as the transferred amounts get bigger, the more you will pay in dollars. For instance, if you were exchanging NZ$10,000 the cost to you will be $200 plus the flat fee of anywhere between $25-$45 depending on who you exchange with.

This exchange rate quote will change constantly because people world over are buying and selling different currencies and so supply and demand forces will determine the price for each currency at any point in time during the day. The quote will also vary from bank to bank and provider to provider.

Your goal should be to minimize the currency exchange fee you pay. Think about it this way – the $200 (or whatever amount big or small) you save could be the $200 either you or your loved one could enjoy.

You are well on your way with being smart about this, now that you are aware of this hidden fee. The next step is to compare the exchange rate quotes from various providers.

On that note, we found that it can get really frustrating to compare the different transfer fees and currency exchange fees for the many money transfer operators, including the banks – short of walking up and down to each store front to check out the individual rates.

So we built an online comparison tool to help you with just that – find the cheapest rates across different currencies.

What’s more, we not only compare the hidden fees we also show you how long it will take you to transfer your money overseas too. We made it even simpler so you can sort each item from best to worst so you can see the cheapest deals right away.

We saved the best bit for the last – it’s all free for you to use! Start your money transfer now.

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