Overseas money transfers

When transferring money overseas, it pays to avoid the banks.
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01 .Online transfer services


There’s no way to know how much might go missing in the course of an international money transfer. Unexpected fees and a laughably bad exchange rate could cost you hundreds of dollars along the way – especially if banks are involved. 

Consumers International (of which CHOICE is a member) made the high cost of overseas money transfers a main theme of World Consumer Rights Day 2012, and with good reason. We’ve heard from many consumers whose funds have inexplicably shrunk while en route to other countries. And consumers who responded to our Facebook call-out on the issue earlier this year had nothing good to say about the way banks deal with international transfers.

One, Trish R, was stung with a $30 sending fee, terrible exchange rate and $50 receiving fee on the other end. As Steve B, who had a similar experience, puts it, “$30 on this end and $25 for the receiving bank smacks of profiteering”. 

A research project commissioned by the online foreign exchange service CurrencyFair last year found about 6.5 million Australians have experience in transferring money overseas, and 88% of those surveyed thought banks charge too much. In addition to what CurrencyFair’s director of Australian operations Sean Barrett called a “massive margin on the exchange rate”, the report concluded that “the biggest issues for Australians making overseas transfers are hidden fees, delays and getting double-charged by banks on both sides”. 

Although the research findings may cast a favourable light on businesses such as CurrencyFair, they’re also consistent with what we’ve been hearing from consumers. 

The non-bank alternative 

The good news is that it’s easier to send money through a non-bank service than you may think. CHOICE took a look at the growing non-bank, online-based money transfer industry in Australia, focusing on three prominent players – OzForex, World First and CurrencyFair. All three are better options than banks by a long shot, but you’ll need to open an account and verify your identity. If you're sending significant sums overseas, simple maths says the sign-up will be worth your while. If you’re sending money regularly, you could save hundreds a year by choosing one of these services over a bank. (How much you save, of course, depends on how much you send, and there are minimum amounts with some services. In fact, you’ll have to be sending $1000 or more with two of the services we reviewed. OzForex has a $2000 minimum for transfers; World First $250; CurrencyFair 5 Euro or equivalent.) 

Middleman fees 

We tested the three services using the same money transfer scenario in the same time frame (since exchange rates are in constant flux) and found they all offer a similar exchange rate saving compared with the banks. The tricky bit is that one service might offer a slightly better deal than another at any time depending on the size of the transaction, currency involved, prevailing exchange rate and whether the client is a regular customer. 

Unavoidably, our test couldn't come up with a reliable indicator of fees that may be charged by banks involved in the process, since they vary depending on the bank and transfer scenario. The non-bank services acknowledge they can’t control such fees. Barrett told us they “vary greatly and are outside our control”. World First managing director Andrew Porter agreed, adding that banks make no effort to offer a reasonably priced money transfer service because they “really don’t service this market and frankly don’t care”. OzForex chief currency and payment strategist Jim Vrondas concurred, saying the service “does not have control over charges levied by intermediary or receiving banks”. 

The bank disclaimers tell the same story. CBA charges $30 for sending a transfer but says “we are unable to control how the payment will be processed by other banks and therefore make no guarantee that intermediary and receiving banks will not deduct additional fees and charges”. Similar disclaimers are made by ANZ and NAB, but not Westpac. OzForex, World First, CurrencyFair also charge fees for transfers under a set amount, but they’re modest compared to the banks.


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Unless fees are well into the hundreds, it will be the exchange rate margin creamed off by the banks that does the most damage. The websites of both banks and non-bank services provide calculators that allow you to see the conversion rate you’re going to receive before you make the transfer, but there’s plenty of room for confusion. Unless you look carefully, it’s not always clear whether you’re seeing the inter-bank rate that applies to the banking industry (also known as the wholesale or mid-market rate) or the rate that will apply specifically to your transfer. The interbank rate, which is not available for personal transfers, offers a much better deal on the exchange. We recommend checking a bank’s rate card or a non-bank’s “customer rates” to make sure the rate the calculator comes up with is the one you’re going to get. 

During our test, the big four banks did about as well as the non-bank services when it came to being clear about online calculators. To their credit, ANZ’s, Westpac’s, CBA's and NAB’s calculators use their customer exchange rates rather than the inter-bank rate (though the banks' exchange rates were markedly worse than those offered by the non-bank services). OzForex’s home-page calculator uses the inter-bank rate, although there's a "customer rates"tab on the home page that will reveal how much you're really going to get. World First’s calculator also uses the inter-bank rate, as it points out, but doesn’t have a customer rate calculator at all. CurrencyFair did a much better job, providing a home-page calculator that uses customer rates as the default option. 


When Porter declined to take part in our test on behalf of World First (or reveal customer rates on the website), he made the reasonable point that consumers are effectively engaging in a one-off deal with a currency trader when they use these services, and the rate can change from deal to deal. “We would need to know the client,” he told us. “Rates will be different for different people.” In all cases, however, non-banks offer a level of transparency sorely lacking in the banking world: the customer knows the exchange rate before finalising the deal. NAB’s disclaimer, that “all rates and margins are subject to change without notice”, applies to all the big four banks, and it means you could get a different rate than the one shown when you requested the transfer.

What about PayPal? 

A number of consumers who got in touch with us about money transfers pointed to PayPal as a reliable and secure way to beat bank fees. But the company itself acknowledges that, because it charges a percentage of the amount sent, “there are more competitive services available” if you’re sending more than $200. PayPal allows you to see the final rate before agreeing to the deal, but it uses the inter-bank rate on its website calculator. The company claims to use that rate, but for the US or Canadian dollar, it adds a 4.5% margin on top of this, and a whopping five per cent for other currencies (a combination of a “cross-border personal transaction” fee of one per cent plus the currency conversion margin).

Test scenario


Our test scenario involved an Australian living and working in the US and sending $US9000 from a US bank to Australia. This is how it panned out on the day we tested in early 2013 (see below), when the Aussie dollar was worth $US1.04. The non-bank conversions include transfer fees; the bank conversions include Australian bank receiving fees but not any sending or intermediary bank fees. We didn't include Western Union because it limits online transfers to a minimum of $2000.


(** PayPal does not recommend its money transfer service for amounts over $200.)

Fees (below) for sending an international money transfer from Australia (excluding any charged by intermediary banks) may be waived or lowered if the Aussie non-bank transfer service or bank has existing arrangements with the receiving bank. 


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