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Cheapest way to transfer money internationally (Hint: it’s not your bank)d

Are you looking for the cheapest way to transfer money internationally and get the best foreign exchange rate? Here’s why your bank and Paypal are not the best choices.

By Annie André ⦿ updated February 21, 2024  
sending money overseas: international money transfer
sending money overseas: international money transfer
tags: banking, money

In 2022, after living in France for 11 years, my husband and I bought a home in Montpellier, which was an exciting and rewarding experience.

To secure our French mortgage loan, we had to send a large international wire transfer to our French bank account to cover the down payment. 

Sending an international wire transfer isn’t rocket science; however, determining the fastest and the cheapest way to transfer money internationally in one currency to our French bank account in euros was trickier than we thought. 

The issue was the cost of transferring money internationally. Specifically, the hidden bank transfer fees and getting the best exchange rate for our international transfer, which seemed to vary wildly from service to service. 

bank fees and costs for sending money overseas: international money transfer

These additional hidden fees and fx markups don’t seem like a big deal when you’re dealing with small international payments and international wire transfers.

But when you’re dealing with north of 10k, 20k and 50k, those additional fees and markups of 2% to 5% needlessly add thousands to the cost of your international money transfer. 

Here are some of the things to consider when trying to get the best value on international money transfers. How to avoid paying additional hidden fees, and how to get the best exchange rate.

International money transfer exchange rate markups

When it comes to transferring money internationally to a foreign currency, your options can be grouped into a few categories:

  1. International bank wire transfer
  2. Online payment services. 
  3. Currency specialists (best value)

But before we dive into the cheapest way to transfer money internationally, you first need to understand the exchange rate used by these different international money transfer services. Not all of them give you the best and most competitive rates. 

Make sure you get the real exchange rate “Mid-Market Exchange rate.” 

Foreign exchange rate margin: is marked up when you send an international wire transfer

When people talk about the exchange rate between two different currencies, they usually mean the “mid-market exchange rate,” also known as the “interbank exchange rate.”  It’s the most competitive FX rate out there. It’s basically the average of all the current buy and sell prices for a currency. 

But here’s the thing. 

Banks and payment platforms can set their own foreign exchange rates and don’t have to use the “real exchange rate.”  They usually add a mark up on to the real exchange rate without being transparent. This means they usually don’t have the most competitive FX rates out there.

The result could mean paying thousands more to convert your hard-earned money into another currency before sending money overseas. 

If you want to save money on international money transfers, and get the most competitive foreign exchange rate out there, you should aim for an FX rate as close to the mid-market exchange rate as possible. The closer you are to the real exchange rate, the more cash the beneficiary will end up receiving.

If you want to see the closest thing to the mid-market exchange rate, search on Google or on Yahoo Finance. 

1) Sending money internationally through a bank

cheapest way to send an international wire transfer

If you need to send money internationally, your bank might seem like the easiest and most convenient option, but there are certain drawbacks to wiring money overseas through your bank, and it is usually IN NOT the cheapest way to send money to another currency. 

Cost of Banks: to send money internationally

Don’t assume that all banks offer the same service, charge the same fees or use the same FX rate for international wire transfers. All of these can vary wildly by bank, currency and country. Banks are also not upfront about their markups and fees, making it difficult to shop around for the best deal. 

Despite these differences, here are the fees you should look out and compare for if you live in the United Kingdom, United States, Canada, or Australia. 

Payment Fees

  • Banks typically charge a flat wire transfer fee for international money transfers, ranging from $0 to $50. Be careful, even if a wire transfer is free, they will make up the difference in the fx markup. 

FX (foreign exchange) Markup

Banks don’t give you the best exchange rate when they transfer your home currency to another currency, which can significantly add to your transfer cost. 

  • Banks charge a higher markup instead of giving customers the “real foreign exchange rate,” called the “mid-market exchange rate.”
  • The fx markup ranges from 0.5% to 3%, depending on the bank, the currency you send and the destination country.
  • Banks are not upfront about the exchange rate used when they transfer money internationally, which means customers never know how much they’re being overcharged.

In other words, banks make money off your money by marking up the exchange rate.

For example, if you currently live in the US and want to transfer $100,000 to France, and your bank charges a $25 flat fee on the transaction and a 3% FX markup, You would have to pay an additional $ 3,000 just for the FX markup. 

  • $100 000 x 3% = $3 000 + $25 = $3 025

You can test this yourself.

Try calling your bank to ask them what the exchange rate would be if you sent money abroad today, then compare it to the rate on Google. 

Oh, sorry, you can’t because the bank can’t tell you which fx rate they use. You’ll have to send the international wire transfer and calculate the rate after the fact. I know this because I’ve tried. 

2) Don’t use Paypal for sending large amounts of money internationally

PayPal is a well-known global online shopping and digital payment platform that allows you to send money online to more than 200 countries worldwide.

Yes, making international payments and sending an international money transfer using PayPal might be convenient and familiar, but the recipient also needs to have a PayPal account.

More importantly, PayPal’s pricing structure is complicated, and you can find cheaper ways to send money internationally in terms of fees and exchange rates.

PayPal: Cons for sending international money transfers

  • Not insured: PayPal is not a bank. It’s a digital payments company, so If you leave a considerable amount of money in your PayPal account, it is not insured as it would be in a regular bank account. 
  • Sending Limits: There may be a limit on the amount you can send if your PayPal account is NOT verified.
  • Huge markup on the fx rate: PayPal does not use the real exchange rate and adds a 3% – 4% FX markup fee to convert your money into the currency you need whenever you send money internationally.
  • Not transparent: They don’t tell you upfront what the fees and markup on the FX rate will be for sending money internationally will cost you. 

3) Currency Specialist: A better, cheaper way to send money internationally

To avoid delays and potentially save thousands on unnecessary fees and FX markups when transferring money across borders into another currency, you should use currency specialists and specialized international money transfer providers.

What is a currency specialist?

A currency specialist is an online service provider specializing in foreign currency exchange and international money transfers.

Currency specialists give customers competitive exchange rates and charge lower fees than traditional banks and payment providers such as Paypal.

For example, I use Wise for exchanging dollars and Euros.

In my experience, Wise offers the most competitive exchange rates, plus they have excellent service and positive customer reviews. They provide competitive rates and a range of payment options

Currency specialists use the real exchange rate.

Another advantage of using a currency specialist is that they give you the closest thing to the real market exchange rate. 

Currency specialists’ fees, FX rates used, and costs are transparent.

Because most currency exchange and international money transfer providers are transparent with their fees and offer an upfront conversion rate, you’ll know exactly how much you’re paying before you send your money overseas. This means you can compare different currency specialists to see which one is the best value. 

You can’t do that with banks or with PayPal.

Wrapping up the best and the cheapest way to transfer money internationally. 

A currency specialist is the way to go if you want to save money on international transfers and get the most competitive rate.

To recap: Currency specialist offer: 

  • Lower fees:  Currency specialists typically charge lower fees for money transfers than banks, PayPal, and other payment providers.
  • Faster transfers: Currency specialists often process international transfers more quickly than traditional banks.
  • More competitive exchange rates: Currency specialists specialize in the foreign exchange market, giving them a competitive edge when it comes to exchanging currencies and allowing them to provide you with a rate closest to the real exchange rate: the Midmarket exchange rate.
  • Transparent fees: No hidden fee because they tell you the fees upfront so you can better understand what you’ll be charged so you can compare with other companies. Banks and Paypal do not do this. 
  • Upfront conversion rate: so you know exactly how much you’re paying before you send your money overseas.
  • Money transfer apps: Many currency specialists also have an app you can use to send and receive money internationally. 

Disclosure: This post may contain affiliate links, meaning I get a 'petite commission' at no extra cost to you if you make a purchase through my links. It helps me buy more wine and cheese. Please read my disclosure for more info.

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Annie André

Annie André

About the author

I'm Annie André, a bilingual North American with Thai and French Canadian roots. I've lived in France since 2011. When I'm not eating cheese, drinking wine or hanging out with my husband and children, I write articles on my personal blog annieandre.com for intellectually curious people interested in all things France: Life in France, travel to France, French culture, French language, travel and more.

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