The current state of globalization makes it easier for people worldwide to transfer money and help each other. However, sending and receiving money internationally is rarely free. Above all, you may notice that the hidden costs of sending money abroad can carve large holes into your budget.
In this article, we address one of our readers’ most asked questions – why are cross-border so expensive? Well, it’s because some banks include hidden fees and high exchange rates. However, you don’t have to pay them if you use a different payment option, like Paxum. When you send and receive funds internationally, you’ll be able to avoid losing money due to low exchange rates. Here’s an overview of the situation with precise results and solutions.
High Exchange Rates Increase International Money Transfers
When transferring money overseas, you most likely send one currency, and the receiver gets the funds in a different currency. Generally, the currency conversion comes at a volatile cost, which may impact the price of your money transfer.
The exchange rate fluctuates heavily between two currencies, depending on market conditions and other economic factors. Therefore, you need to consider it before sending money internationally. In other words, always have extra funds in your account to cover the conversion fees.
Marked-Up Exchange Rates Add Up to Your Transaction Costs
Most people use Google to see the currency exchange rate before sending money abroad. However, to their surprise, most banks and money transfer companies don’t use the same market metrics. That’s why they find out they must pay more than Google initially told them.
The cost difference results from marked-up exchange rates, which banks do not disclose to their customers. Therefore, not even Google knows how much you’ll have to pay for conversion fees before making an international money transfer. Moreover, the marked-up exchange rate is calculated, including a percentage of the amount you transfer. So, you may pay different exchange rates for every transaction you make.
Beware of Correspondent Fees
Some banks do not transfer your funds directly to the receiver’s bank. Instead, they wire the money through an international web of correspondent banks. These intermediary services may increase the security and speed of your cross-border payment. However, they also increase its cost with correspondent fees.
Generally, intermediary fees don’t cost that much. It all depends on how many third-party banks your bank uses to transfer money overseas. The more they use, the higher the costs. You may want to check with your bank before making an international money transfer and decide if the correspondent fees are worth paying.
Check Recipient Fees Before Transferring Money
Depending on the receiver’s location, they may have to pay hefty fees for receiving your funds. International money transfers are often free of recipient fees. However, some banks in remote countries could employ them. Your best choice is to verify this with your bank. Otherwise, the recipient will have to pay a significant part of the money they receive on fees.