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Why ‘fee-free’ money transfers aren’t always the cheapest

4 min read
23 Sep 2019

Aussies are paying millions too much to send money overseas because of confusing pricing and misplaced loyalty to banks, according to findings from the Australian Competition and Consumer Commission (ACCC).

In the Foreign Currency Conversion Services Inquiry report, the ACCC found that many Aussies default to the big four banks to transfer money overseas, despite the availability of cheaper foreign currency conversion (FX) services on the market.[i]

How much is loyalty costing Aussies?

The report found that customers who used the big four to transfer currency in US dollars and British pounds in 2017-18, could have collectively saved about $150 million if they’d just used a cheaper international money transfer (IMT) provider. In one example, a customer transferring $10,500 to the United States could have saved up to $550 by using the cheapest IMT service.[ii]

Our money expert Rod Attrill, said that non-bank or independent IMT services were typically a lower-cost and faster alternative to send funds overseas.

“You could be charged a transfer fee of up to $50, plus a margin on the daily exchange rate and other hidden fees when you send money abroad through a bank,” Rod explains.

“On the other hand, many independent IMT providers charge zero up-front fees or a marginal fee for large money transfers, partly because they have lower overhead costs.

“They typically have more competitive exchange rates than banks.”

Don’t be fooled by ‘fee-free’ IMT offers

Customers should never assume that IMT services advertising ‘fee-free’ money transfers are the cheapest option. That’s because a host of factors will determine the true cost of your international transfer, including:

  • the foreign exchange rate
  • the mark-up (for converting your currency) tacked on the exchange rate
  • your buy-and-sell currency (i.e. you may pay more to send your funds in AUD instead of in your recipient’s local currency)
  • your transfer amount
  • your payment method (i.e. cash transfers, credit card etc.)
  • where you’re sending your money.

Always compare the mid-market rate (the midpoint between the buy and sell prices of two currencies) from different IMT providers, preferably at the same time, on the same day.

“Also, check the mark-up on the mid-market rate which is how many IMT services make bank on their ‘zero commission’ offers,” Rod said.

However, some IMT services still charge an upfront fee. This will either be a flat fee or a percentage of the amount you’re sending, or both.

It’s also worth noting that money transfer recipients may be charged intermediary bank and receiving fees (by the recipient’s bank). These fees are typically deducted from your transferred amount.

How to save on your international money transfer

Compare the mid-market rate independently

Some IMT providers tack on a margin on top of the mid-market rate, which is essentially a hidden fee and makes up the total ‘mid-market’ rate quoted to customers. That’s why the mid-market rate may vary between different providers. So before you decide, do some independent research to find out the kind of mid-market rate you should be looking for, but keep in mind it changes consistently with the market.

Contact your IMT provider directly

If you want to avoid the hassle of having to comb the fine print to find out how much you may pay in total to send your funds overseas, contact your IMT provider. Request a breakdown of all charges and transaction fees that may be applied to your money transfer. You may even be able to negotiate a better exchange rate with them directly.

Compare international money transfers

There’s a host of new entrants in the IMT space offering low-cost solutions to sending your money overseas. These include:

  • cheaper exchange rates
  • low or zero fees
  • better transfer features (in some cases).

If you’re looking for a great-value transfer, you should shop and compare rates from different providers using our free comparison tool. Simply enter the amount you’d like to send in your chosen currency and compare rates from our reputable, licensed brands in just minutes!


[i] Australian Competition and Consumer Commission- Foreign currency conversion services inquiry (2019).

[ii] Australian Competition and Consumer Commission- Foreign currency conversion services inquiry (2019).

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Written by Megan Birot

Megan considers herself a savvy saver. She aims to make finance fun and inspire people to make decisions best suited to their budget and lifestyle. Her number one tip is: “saving doesn’t have to be boring, get creative and reap the rewards.” Megan has a background in journalism and particularly loves to write about health and money. She hopes to one day pen a best-selling book but the topic is a well-guarded secret.

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