Whether you require to send money abroad to a relative in Australia, pay for a house purchase in the U.S, or remit salary to your overseas employee in India, there’s a cheaper way to handle this than wiring the funds through your bank.
Most Canadians aren’t quite aware of that, but there are companies which grant you access to foreign currencies for a fraction of the cost it would cost you at a bank. These are serious companies which adhere to strict regulators, and move billions of dollars each year. Traditionally, these companies have been used by small internationally-trading businesses, but in recent years, more and more private clients are changing the way they transfer money internationally.
What does a transfer even cost?
The reason why these companies have been predominantly used by businesses is the fact businesses tend to understand costs at a higher level than individuals. Most people don’t realize that transferring $100,000 to your U.S bank account (CAD to USD) could cost you as much as $2,500!
Let me break down the costs for you.
Wire costs (which banks happily advertise): $10 to $40 per transfer. Doesn’t seem like much for a substantial money transfer.
Commission (which banks happily advertise): 0%. Most modern banks and exchange bureaus promote themselves as being 0% commission.
Margins (the difference between what it costs banks to buy a certain currency and for how much they sell it): 1-3%, and could be higher if you are exchanging your CAD to an exotic currency.
So it all boils down the exchange rates offered at any given time. If they are 2.5% worse than the real rate (the one you see on the newspaper, or on Google) it means you’re paying your bank 2.5% of the lump sum you are transferring to a bank account abroad. Plain and simple.
Howcome a simple action costs so much?
Banks will come up with all sort of excuses for this question. “We have to hedge ourselves against risks, we we take a wide margin to stay on the safe side”, they often claim. Baloney, I say. They take as much money as they can because their clients are unsuspecting. Most people don’t even know that the Buy/Sell rates offered by banks are not the real rates in which banks buy currency for. Like with plenty of other cases, banks like to abuse their power and public trust, and they do so very well.
What’s the alternative?
There are hundreds of Canadian-facing companies from across the global that offer foreign currency transfers for better rates than banks. If you have been keeping up to date with the money markets you might have heard of Transferwise, for instance, a British Startup which has just launched its “borderless bank account” in Canada (literally hours before writing this post).
Reading about various companies and their offering could be quite tedious, though. A lot of the companies are very samey in nature, and it’s hard to pinpoint the differences. They often overcomplicate their websites just to keep a competitive advantage so they not fully reveal their offering, rates and accessibility to currencies.
MoneyTransferComparison.com does all the heavy lifting in that sense. It reviews dozens of different companies and aggregates all the information you could find about them online. The best part? All its top recommendations are companies which accept clients from Canada and can transfer from abroad to Canada! Although the site is serving mostly Brits (where this industry is most popular at), it sticks to the largest and most reputable services… and these multi-million dollar companies all have offices in North America!, and bank accounts in the US and Canada.
I hope you learned a thing or two about international money transfers and how to save a few dollars if you need to send money abroad.