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Fees — we’ve discussed them in detail before now. We’ve shown costs for wiring or obtaining foreign currency through various financial services, what they charge, both stated, and in hidden fees. We’ve gone over the various costs for obtaining cash in the local currency of another country either via a bank, an ATM, or a credit card, and listed a good number of them as examples.
However, here in this concluding article in our series on the subject, we are going to attempt to show the total of all those costs. We want travelers to have a good idea just what the sum of all these fees can come to, and what to look out for in some instances.
Exchange Rates, Work by User: Mattes, Wikimedia Commons
Before we get started with this though, and as an example, I did want to mention a website that is becoming more prominent of late, advertising a lot on television, and one that promises substantially reduced costs when it comes to wiring money abroad (only “$4.99”). It’s called Xoom.com. I think it may serve as a good instance of what total costs can come to, and why you, as the traveler, must always be aware of certain things, like the current exchange rate.
Mind you, we are not promoting this site over any others, but they claim to be seriously cheaper than most other means of wire transfers, so I felt we should include some information here about them. I decided to test Xoom.com on this claim of theirs. Below, I’ve included a chart of their devising. On that same chart is a calculator, one which I used for the amount of money I needed to wire to someone’s bank account in England recently. The chart also includes comparative rates for Xoom.com versus Western Union, according to Xoom.com’s own estimates. Do check them out.
As our prior article, The High And Often Hidden Costs Of “Wired” Currency Transfers, showed at that time, it cost me almost a whopping $45.35 to send the amount of $345.00 to an English bank account. This does not include the extra fee the receiving bank charged to receive the money and make it available to their client. But let’s use the fee of $45.35 for $345.00 as a comparison. This $45.35 includes an extra 3 percent on top of the then current exchange rate for the British Pound Sterling that Bank of America charged me, and also the bank wiring fee they charged, as well. Now, let’s look at the Xoom.com chart below:
Xoom Comparison of Currency Exchange Services
As you can see, by looking in the top left corner of this image, I used the same figure ($345 USD) to transfer. If I transferred it via my bank account through Xoom.com, they are saying the Total USD fee would be $349.00. They show only a $4.99 fee for the whole transaction!
Or do they? Let’s take a closer look at how much that comes to in actual British Pounds, the figure of £211.02, as they stated. The exchange rate at the time of this article for the British pound was: 1.60 USD (actually, $1.598, but I’m rounding it off up). Now, a quick calculation shows us that should come to $337.63 (1.60 x 211.02 = 337.63). Add in Xoom.com’s stated low cost of $4.99, and we get a total of $342.62, instead of their stated total cost of $349.99. As you can see, the figures don’t match. There is a noticeable discrepancy. Their charge is higher. How can this be? Well, obviously, since the $4.99 is a fixed price, they had to have used a higher rate of exchange to get to this higher cost than the then current one. In short, by my calculations (and admittedly, I’m no mathematician), this comes to an added fee of approximately 2.0 percent above the actual exchange rate at the time of this article. (Actually, I’m getting just over 2.1 percent by my calculations, but that alters if one does rounding off of the figures.) Now, most major transfer services do charge a 1 percent additional fee, so that much extra is pretty much unavoidable most places.
Historical Exchange Rates Chart-Table Currate.com
However, it would appear, if my calculations are, indeed, correct, that Xoom.com is adding on yet another 1 percent on top of that necessary 1 percent, for what would appear to be a grand total of about 2.0 or 2.1 percent above the then current exchange rate. The $4.99 is then added to this amount. So, $4.99 certainly doesn’t appear to be the total actual cost. There is the added exchange rate differential embedded as a hidden cost there, as well.
Yes, it would seem even Xoom.com has hidden fees, besides their highly touted and visible $4.99 one. And yet, on the face of it, they still seem far cheaper than Western Union, for instance, as they, themselves, show in the above chart. However, you’d also better check out what that receiving bank might charge, as well as your own sending bank. My bank, Bank of America, does not charge anything if Xoom.com does it as a deduction from my account. Receiving banks in foreign countries may do it differently, and that would be on a bank-by-bank basis. However, if it is simply done as a straight deposit, in the local currency, to them, then there shouldn’t usually be a charge.
But there is more. Check out that same top left corner of the image above (Xoom.com). Look at those much higher costs posted there if you use a credit or debit card, or Paypal account, as most of us would probably do.
For my amount of transfer, it comes to the rather large sum of $17.99 (why don’t they just say $18.00 – do they think we can’t figure out that’s what it really amounts to?), almost four times higher than the stated $4.99. With the 2.0, or 2.1 percent added, that’s a cost of $24.74, approximately. That isn’t including whatever fees you might incur from your own debit or credit card, or Paypal account for any transactions you make. I use Paypal, and I know they charge! So, it’s not quite the deal Xoom.com makes it out to be, with just “$4.99” as the highly advertised charge, is it? However, they did post their rate (.61) for the dollar versus the pound right up front, and they do only charge the $4.99 if you do it via your bank and are sending it to another bank. However, don’t forget, there is also the matter of what exchange rate they use, as well.
Even so, it would seem they are still one of the cheapest places around for money transfers up to $2,999, at least, comparatively speaking. But that is, and please remember this, if you are using your bank and a receiving bank for wiring of the money through Xoom.com, and are not using a credit or debit card, or Paypal account. If you use these, again, as most of us do, it will be considerably more expensive. So again, there are a lot of caveats to keep in mind, as always, it seems.
This brings us to the question of total costs for obtaining our destination currencies. For wire transfers to a bank in the country we wish to visit, these can be very high. Let’s just use one example to keep it simple, my own transfer, bank-to-bank, from America to England. My bank was Bank of America, and the receiving bank was Lloyds.
Bank-to-bank, the total cost of transfer for $345.00 was $45.35. Again, there was an additional fee added on by Lloyds, whom you as the sender don’t have to pay, but the recipient does. Since I’m, paying it (the receivers wanted their total amount undiminished), that comes to a total of $53.39. So, bank-to-bank transfer costs were $53.39 for the $345.00. This is about average, being neither quite the cheapest, or most expensive, but a good ballpark figure for bank transfers as a whole.
For Western Union, the cost can be as much as 19 percent when one adds in the higher exchange rate charge, and service fees. On my $345 amount, this would be $65.00, even higher than the average bank, almost prohibitively high, in my opinion. For Travelex, the cost (based on my prior article on this), can be as high as 23 percent when one counts in all their costs, including the hidden ones. Again, based on $345, this comes to a cost of $79.35. YIKES! For me, that’s simply outrageous.
ATM’s, if you are using your own bank’s machines in the destination country with a debit card, do not usually charge a fee to get local currency. However, using Bank of America, again as a typical example, there is a charge of about 1.713 to 1.72 on top of the current exchange rate. So, to withdraw $345 from my bank’s ATM would cost you about $5.90. Not bad at all, compared to other services. However, if you use an ATM not belonging to your bank, the combined fees of that bank and your own bank’s for this privilege, could be as much as $5.00. This comes to a total of $10.90. This is still a bargain rate. But rates seem to be going up in this regard. Some charge as high as 2.75 percent, with a few going even higher! Still, this only comes to around $10.00 total (if you use your bank’s ATM) – still a relatively good deal.
Credit Card transactions at ATMs are also a good deal with regard to exchange rates, since they usually charge about the same percentage rate as the banks, or even less. HOWEVER, credit cards often charge high interest rates once you have withdrawn that cash, and unlike purchases made with the card, there is no delay on this. The minute you get the money, you can be charged as much as, if not more (because this is changing rapidly of late, as well) as high as 29 percent, and that’s the minute you have that money in hand, not 30 to 60 days later. When you get home, you will have a sizeable bill for that withdrawal, I’m betting. Do remember, with the current financial situation worldwide, many of these stated costs are rising significantly, and these numbers will rapidly become obsolete, meaning they probably will be even higher in many cases.
The upshot of all this? Your best bet is to use your bank’s debit card at a branch of your own bank in the destination country, or that of an affiliated bank. Your next best bet is to use your bank’s debit card at some other bank that will accept it. Other solutions vary in cost, but all are substantially more, with some bordering on horrific!
And whatever method you use, the only way you are going to find out what those hidden fees are is to know the current exchange rate. That’s an absolute necessity, or you won’t have any idea what that service or bank is really charging you, in total, for that currency exchange. So use Currate.com to find the most reliable and regularly updated exchange rates. And remember, if you have a mobile phone with Internet browser capability, then go to http://currate.com/mbasic.php. If your mobile phone has enhanced features, then use http://currate.com/menhanced.php. This way, and along with Currate.com’s easy-to-use currency calculator, you’ll always know what those hidden fees are, just how much they really cost in total. Currate.com also has actual images of most of the world’s currencies, which is a big help if you are going to destinations with differing currencies. And don’t forget Currate.com’s world map, where you can just point and click to the country of your choice. And good luck with those hidden fees!
Rob Shelsky, Currate.com Contributing Editor
Robert Rademacher, Currate.com Editor-in-Chief
References:
The Best Way To Withdraw Cash Abroad
http://www.lovemoney.com/news/travel/the-best-way-to-withdraw-cash-abroad-3480.aspx
Xoom.com
https://www.xoom.com/sendmoneynow/money-transfer-fees
Ripoff: Visa/Mastercard’s “Foreign transaction fee”
http://www.boingboing.net/2007/02/03/ripoff-visamastercar.html
Which Credit And Debit Cards Are Best Overseas
http://www.usatoday.com/travel/deals/inside/2009-05-21-best-overseas-credit-card_N.htm
Travel Money – A Traveler’s Guide To Managing Your Money
http://www.workgateways.com/working-uk-travel-money.html
American plastic as we know it