Overseas money transfers

When transferring money overseas, it pays to avoid the banks.
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02.Beware the online calculator

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).


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