International students usually need to convert currencies to pay for tuition & life abroad.
When doing this, it’s easy to get confused by the different fees and costs involved. Some of the costs can be hidden, so you need to know how to spot them.
The problem is a large one, too. Data from a leading currency transfer app shows that Switzerland, for example, is in the top 100 recipients of remittances across the world. Its annual inflow is estimated at $3bn!
Overpaying on fees by just a couple of percent can result in billions of dollars of people’s money being lost to fees – and overseas students are no exception.
In this guide, I’ll walk you through the costs and pricing of overseas money transfers. By the end, you’ll be in a position to find the best deal throughout your studies.
Finding the best exchange rates
Let’s imagine you’re moving from the US to study in Switzerland. You’ll need to convert from USD to CHF.
Surely there’s only one exchange rate? Well, yes – if you check on Google, there is only one rate at any given time. That’s called the mid-market rate.
However, not all money transfer companies will actually give you the mid-market rate! Doesn’t seem fair? Well don’t forget, these foreign exchange services need to make some profit to keep serving their customers.
So what they do, is they give you a slightly worse rate than mid-market. While Google might tell you that 100 USD is 88.19 CHF, you might only get 80 CHF in reality.
The 8.19 CHF difference is a type of hidden fee. Now imagine you’re trying to receive $1,000, $10,000 or more. That exchange rate has a large impact in real terms.
This means that companies advertising ‘no fees’ on their transfers require extra attention. Sure, there may be no fees – but is the exchange rate competitive? How much am I truly paying for this service?
It is possible to get the mid-market rate with some companies, like Wise. However, that doesn’t guarantee you a cheap transfer.
Transfer fees
As well as exchange rates, you must consider fees. Transaction fees are clearly stated with each transfer, and are easier to see and understand.
Companies like Wise prefer to charge transparent fees, while giving you the mid-market rate.
Others charge no fees, but offer worse exchange rates.
Overall, exchange rate markup and transfer fees are interchangeable. What really matters is this: for X in my currency, how much will I get in exchange? The more, the better.
Other costs to be aware of
The majority of international transfer costs come from exchange rate markup and fees charged by the transfer company.
However, it is possible for you to get hit by extra fees:
- Intermediary bank charges – sometimes funds can pass through local banks en route to their destination. These banks can charge fees for handling the money. Usually, the amount is in the range of $20-30, which isn’t a big deal for large transfers but could be significant for smaller, regular transactions.
- Debit card fees – certain companies charge more for paying by debit card. The cheapest method tends to be bank transfer. As an added complication, payment methods can also change the exchange rate. So they might appear to have the same fees, but keep an eye on the rate too.
- Credit card fees – almost all companies charge quite a bit more for using a credit card. You may also get billed by your credit card company on top, for a cash advance
How to compare the cost of moving currency internationally
The best way to compare like-for-like between the different fee models is to use a money transfer comparison site. This allows you to see the ‘amount received’ sorted by high to low, regardless of whether fees or exchange rates are having an effect.
With any luck, you’ll be left with more cash in your pocket to enjoy student life that bit extra!
