TransferWise: Cheapest Way to Send Money

TransferWise Send Money

It’s been more than a year since I’ve been using TransferWise for foreign exchange transactions and sending money abroad. To date, I’ve transferred £24.4K and saved £760. I previously used PayPal to send money but switched after I reviewed their currency conversion fees which are relatively high. I’m very happy with TransferWise and will detail my experiences in this post.

TransferWise TransactionsTransferWise is one of many financial technology (FinTech) companies disrupting traditional lines and practices of businesses. Companies such as Wealthfront (robo-advising) and Lendio (loans) also fall into this category.

By “disrupting,” TransferWise is leveraging technology and innovation to decrease transaction fees while making money transfers more convenient. What we see with FinTech companies is a revolution against unfair and buried costs that take advantage of consumers (very much the philosophy of the mutual fund industry). According to TransferWise,

“Sending money abroad is deceptively expensive, thanks to the hidden charges we’ve all been forced to pay. The banks claim “free money transfers”, “0% commission.” Sounds like money’s already flowing freely, but far from it. It’s pure propaganda.

TransferWise removes all the wrongness, letting people send money abroad at the lowest possible true cost. Using only real exchange rates and tiny not-hidden-fees.”

I discovered TransferWise through CrunchBase on news of a successful funding round. In June 2014, Richard Branson (Virgin) invested $25M in TransferWise which got my attention. Also, TransferWise was founded by Taavet Hinrikus, Skype’s first employee, which adds a lot credibility.

TransferWise is a currency conversion service, so customers can’t transact in the same currency. The only exception is via their ‘Requests’ service, where GBP-GBP and EUR-EUR payments are possible. If you want to send money in the same currency, TransferWise won’t suffice. Also, perhaps because of rules and regulations, I can’t use TransferWise to transfer money from my PayPal account. Transfers must originate from a bank account. Maybe this will change in time making it even more convenient.

Beware of Fees and Exchange Rates

With foreign exchange transactions there are two items to be aware of:

  1. The flat or percentage-based currency conversion or transaction fee
  2. The quoted exchange or conversion rate

TransferWise charges an inexpensive conversion fee of 0.5% to 1% for widely held currencies such as USD, EUR, GBP, and CAD. The rate is a little higher for less liquid or transacted currencies, but still much better than most alternatives. Since they advocate transparency, their fees can be found on their pricing page, so you’ll know what your transaction will cost in advance. Additionally, they offer the best price guaranteed on the more than thirty currencies.

As for the exchange rate, TransferWise will transact your money at the best possible rate known as the mid-market or real exchange rate (I call it the Google rate). They’re able to offer this rate based on their matching currencies business model.

Another critical consideration is processing times in which case TransferWise completes transactions within one to four working/business days, which is standard for most money service providers.

Ally

Who Should Care About Fees and Rates?

Foreign exchange, sending money, and money transfers is a trillion dollar plus industry that impacts businesses as well as consumers. In particular, these four groups should be interested in using the best currency conversion services to manage activities.

  • Online or overseas workers and digital nomads
  • Online/offline business owners who transact in multiple currencies
  • Frequent travelers
  • Snowbirds

Money Transfer Comparison

It took me a matter of seconds to realize TransferWise was a better option than PayPal, but I wanted to see how they compared against other well-known providers including Western Union, MoneyGram, and Xoom (a PayPal company).

For my experiment, I only have $1,000 USD to spend and not a penny more. Therefore, any fees that aren’t included in the total must be deducted from my amount, for instance, I would subtract a service charge of $20 from my funds leaving me with $980 to send. Secondly, I will be sending money to a friend in Canada, so the final totals will be in Canadian dollars (feel free to experiment with different currencies, but the same outcomes are likely). Here are the results.

CompanyFeeExchange RateAmount Sent in Canadian Dollars
Western Union
$19.991.2206
$1,196.30
MoneyGram
$201.2511
$1,226.13
PayPal
$251.2571
$1,257.19
Xoom
$4.991.2747
$1,268.33
TransferWise
$9.901.2899
$1,277.13
Google Quote1.2899

TransferWise performed the best and was the only company to provide the real or mid-market rate as per their claim.

Worthy Alternatives

TransferWise offers an excellent user interface, customer experience, and variety of currencies, but you may prefer or need a different service provider to meet your needs. I recommend exploring the following companies which also offer low fees and fantastic exchange rates.

Who to Avoid

WarningI believe transparency is important. I like that TransferWise offers a calculator on their homepage which I can access without having to create an account. Conversely, companies like Travelex that force you to sign up to access conversion fees and rates are outdated in their processes. Similarly, I don’t recommend that you use the following companies based on transparency, ease of use, fees, and rates.

  • Banks in general
  • Neteller
  • Payza
  • Skrill
  • Travelex

We work much too hard for our incomes to be swindled by big banks and mismanaged money service providers. Look out for fees, exchange rates, and details in the fine print to manage your money wisely. Also, if you send money frequently or in large amounts, you could be losing thousands through a terrible service provider.

It’s one thing to consider my review in isolation, but another to explore thousands of reviews at Trustpilot that have led to a 9.5/10 rating for TransferWise.

 

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