According to the World Bank, Australians transfer more than $7 billion overseas each year to family, and that’s not counting money used for personal trips.
But those sending money could be losing millions, with major providers charging excessive fees and offering distorted exchange rates.
We tested eight different transfer scenarios, and the big banks were consistently among the worst performers.
According to consumer organisation Choice, the big four Australian banks offer ‘laughably bad’ exchange rates and charge excessive fees.
“If you regularly send money overseas, hooking up with an alternative provider can save hundreds per year,” the organisation says.
Alternative providers include foreign exchange brokers, new start-ups which offer peer-to-peer transfers, and cash payment services such as MoneyGram and Western Union.
After road-testing several providers, SBS found that it definitely pays to shop around. Comparing quotes can save you hundreds of dollars.
Before we show you our results, a few notes on getting the best deal.
Check out the World Bank's global comparison website
The World Bank is trying to lower the cost of sending money internationally, and part of that is trying to increase transparency and competition.
Their online calculator lists a number of different cash and transfer options, and shows you the cheapest provider for more than 300 different 'country corridors' for transactions.
The best provider for a particular transaction may not be one we tested, so it's always worth checking them out.
Make sure you’re seeing the actual rate, not the interbank rate
Companies often show you a better rate on their website than the one you'll actually get. Pay attention to the fine print on many websites.
There are two rates you might be shown. The interbank rate is the rate banks charge each other, and the customer rate is the rate they charge you.
It's worth comparing the rate you receive with the interbank rate, that way you'll know exactly how much you're being charged for the transfer.
Some websites are misleading, showing you the interbank rate on their calculators but charging you a much less impressive customer rate once you sign up.
Make sure you’re seeing the actual rate a company charges its customers, not the interbank rate, when you compare quotes.
Also, make sure you check that all fees and charges have been included in the total. We found that several providers tried to sneak in extra charges at the end.
If possible, open bank accounts for both the sender and recipient
Broker services, peer-to-peer lenders and banks require bank accounts at both ends to conduct the transfers.Services like Western Union and Money Gram allow personal cash pick-ups, in case the recipient doesn’t have a bank account, but you may end up paying for the privilege. We found their fees and rates to be less competitive.It’s advisable for both the sender and recipient to have bank accounts in order to take advantage of the best transfer rates.
Make fewer, larger transfers rather than smaller, frequent transfers
In almost every case, the more money you transfer, the better the rate you will receive. The more you can save up before making a transfer, the better the effective rate will be.Some fees are waived when you’re transferring more than $5,000 or $10,000.
Always, always shop around
Depending on the currency and amount, as well as whether the recipient has a bank account, quotes from various companies can vary significantly.In one case, a major bank would have pocketed 36
per centof a transaction, whereas a competitor offered the same transfer for just two per cent.No single company was consistently the best on offer. Providers which performed terribly in some scenarios were the best options in others.All this goes to show that you should always, always shop around.
US transfers
We used US transfers as a benchmark to show how the size of a transfer can affect the rate paid. The best effective rate is in green.If you compare the interbank rate to the amount offered by the particular company, you'll see the exact amount the broker is taking.As foreshadowed by Choice, the major bank performed particularly badly compared to other brokers.Cash payouts were also generally more expensive than bank transfers, and maxed out at transfers of $5,000. CurrencyFair performed well with larger transfers.
Other currencies
We also road-tested a range of other transfers. Some sites didn’t have as many currencies on offer as others, limiting options.For our transfer to Kenya, we lost 12 per cent in fees and rates. Sub-Saharan Africa is known as one of the most expensive places to transfer money to.The major bank was again disappointing. Out of all our scenarios, they never offered the best effective rate.TransferWise performed well with the smaller transfers.
A note on other providers
There are hundreds of transfer options around the world, and we only tested a very small sample. The best provider may not be one that we tested, so check out the World Bank's online calculator.
A note for tourists and students abroad
We focused our tests exclusively on direct transfers overseas. If you’re a tourist, you should compare exchange rates and locally and from providers prior to travel.If you're going for an extended period of time, you may save a lot of money by opening a bank account and using the transfer services described above.Major banks and companies like Travelex offer currency exchange services and debit cards for use overseas (though the best option may be using your own Visa or Mastercard).Again, it pays to shop around as rates and commissions can vary wildly.
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