When it comes to the subject of sending money to relatives or business associates abroad, many people are under the false assumption that the only cost involved is the actual money you’re sending.
Once you’ve fund a money transfer service, such as Remitly, you can use to actually send money abroad, the time will have come to sit down and figure out what the costs will be.
Yes, this is something that you will actually have to sit down and calculate. Otherwise, you may be dramatically surprised by the actual cost of sending all that money to a recipient in another country.
As we will soon see, there are many factors that directly influence how much it costs to send money internationally.
Here are the four steps you need to follow to figure out the cost of sending money internationally:
Step #1 – Figure Out The Exchange Rate
The exchange rate is simply the amount of the foreign currency that is traded for each dollar you send. In other words, it’s the amount of foreign money your U.S dollars convert into.
You may wonder how this plays into the total cost of sending the money, since logically you would think that the exchange rate is universal.
But in reality, exchange rates will often differ between money transfer services, and even more oftentimes they will change several times a day to reflect market trends. The reason for this is because money transfer services will constantly adjust their exchange rates in order to earn money.
It’s important for you to get a guaranteed rate instead of an estimated one. This way you will know what the margin is that the services take off to send the money. If the rate is 4% and you’re sending $500, that means you would pay $20.
Step #2 – Figure Out The Wire Transfer Fees
Sending money internationally means that your bank will always charge a wire transfer fee.
The fee is entirely dependent on your bank, and more often than not your banks will change wire transfer fees depending on the currency in which you are sending your money. If you are sending U.S. dollars, you’ll almost always pay a higher fee in contrast to sending foreign currency.
Some banks and money transfer services will charge a flat rate that can vary anywhere from $5 to $20, while others will charge a percentage typically ranging from 0.5% up to 5%. Banks and services will usually go with the flat rate, while using debit cards or credit cards means you should end up paying a specified percentage.
As with the exchange rate, you will want to ask for a guaranteed wire transfer fee. Don’t ask for or be fine with an estimated fee, because more often than not it will be lower than the actual fee that is charged to you.
Step #3 – Figure Out The Total Cost
This one is the simplest: you simply take the amount of money that you will be sending in addition to the fees that you’ll be paying as well.
Step #4 – Figure Out The Total Currency Delivered
The total currency delivers is simply the total sum of currency that is being delivered to your recipient. To calculate it, you will need to take the number of dollars that you are sending and then multiply that number by the exchange rate of your money transfer service.
Here’s a golden rule of thumb to remember: the more money you send, the better. The reason for this is the various fees and rates: a 5% fee for sending $500 means a lot more than sending $5,000 or $50,000, for instance.
The Cost Of Sending Money Internationally
These are the four steps you will need to follow in order to calculate how much it’s going to cost you to send a sum of money to someone else in another country.
While you may not like the fact that you have to pay more than you originally expected, on the other hand not being aware of how to figure out the total cost of transferring the money would most certainly catch you off guard.
One final thing to keep in mind is that your recipient may be charged a small fee to receive the money as well. If so, it shouldn’t be any more than thirty dollars or so. However, it is important that you make your recipient aware of this fact so they will be prepared to pay the fee.