It’s a rite of passage for many of us. With a lack of well-paying positions here at home, millions of Indians head abroad in search of opportunity. They find it in places like Dubai, Europe, and America.
Even if these workers earn a low wage, sending 500 AED, or 200 USD/EUR home per month is easily doable. This amount of money, insignificant to Emiratis, Europeans or Americans, can transform lives back in India.
Sadly, though, first-timers senders often lose a shocking amount of their remittance to transfer fees. These charges, over time, can add up to many THOUSANDS of rupees.
That is why you must be aware of the money transfer fees every time you send. In today’s blog, we’ll show you how badly some exchange houses rip off their customers. We’ll also introduce you to some far better alternatives.
Transfer Money from outside India
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Up Front Money Transfer Fees Seem Small – But They’re A False Front
Here’s the problem – senders that use expensive remittance channels don’t know they’re getting fleeced. They shrug at sending fees – like the 8.90 GBP that Western Union charges. After all, they say, “How else would these firms make money?”
That’s precisely what these companies are counting on. Last year, Western Union earned 5.29 billion USD or 391 billion INR in revenue. They didn’t achieve these staggering results from charging 8.90 GBP per wire.
It’s about money transfer rates – not fees. In the next section, we’ll explain why this matters.
Differences In Bank Exchange Rates And The “Real Rate” Matters
The exchange rate that exchange houses/banks offer is NOT the REAL one. Rather, it is the interbank rate, which is what brokers use to move capital amongst themselves.
The difference between the interbank rate and the one they charge makes up the MAJORITY of their profits. That disparity varies depending on the currency pairing. But, on average, remitters use an exchange rate as much as 5% off interbank.
Here’s what that means for you. Let’s assume you want to send 200 GBP back to your mother in India. Through Barclay’s, you end up getting a GBP/INR rate of 87.9345. After deducting 25 GBP for an international wire fee, 175 GBP becomes 15,388 INR in your mother’s account.
That sounds fine – after all, it covers a month’s rent for many Indians. However, when you see how much you would have gotten using the interbank rate, you’ll be outraged.
Let’s assume for a second that you were able to send cash at that price. Sending 200 GBP fee-free at the GBP/INR of 90.6573 would yield 18,131 INR on the other end. In other words, you pay more than 27 GBP to send 200 GBP. Over a year, you’d lose almost 330 GBP – or more than 1.5 month’s worth of remittances – insane!
Here’s How Much A Low-Cost Money Transfer Firm Can Save You
Tragically, it’s not possible to send cash fee-free. But, thanks to increasing competition online, you can get tantalisingly close. There are dozens of firms out there, but Transferwise is the leader.
This firm was born out of frustration. The wide margins that banks charge cost Transferwise’s founders THOUSANDS of GBP per year. They were both Estonian with bank accounts in both the UK and Estonia. So, they worked out an arrangement where they would pay each other according to the interbank rate.
After a while, they figured that millions had the same problem they did. So, they built a business around their arrangement. Since 2011, Transferwise has offered the interbank rate to millions of business people, individuals, and remitters.
Wait – if they offer the interbank rate, how do they make money? Rather than hide tonnes of fees in their exchange rates, they charge a small percentage fee on transactions. As of 2018, this strategy has worked out well – every month, Transferwise moves 4 billion GBP around the world.
Let’s see how much Transferwise would save you on your remittances every month. When you use the GBP/INR currency route, they charge a 0.67% transaction fee. On a 200 GBP transfer, that means Transferwise will transmit 198.66 GBP to India.
198.66 GBP gets moved at the GBP/INR interbank rate of 90.6573. At that price, 18,009 INR will land in your mother’s bank account. Compare that against the bank transfer earlier. By using money transfer providers like Transferwise, you would send 2,500 INR more per month. It looks like Mum will be able to eat out more often!
Give Your Loved Ones Every Rupee They Deserve
Our lives aren’t just about us. By finding ways to give back, we can leave a legacy. Overseas, you will have a chance to earn wealth that people at home can only dream of. Even a small chunk of your monthly earnings can have a significant impact.
Fight hard to get the best price possible on money transfers. By doing this, you’ll magnify your loved one’s standard of living that much more. Even a few thousand Rupees makes a difference, so shop diligently!
