Do you ever wonder why the fee for remitting money is deducted from the foreign exchange amount that you’re transferring? Or why international transfer fees aren’t capped at a flat rate regardless of the amount of foreign currency transferred? Most remittance services deduct the transaction fee from the amount that is being transferred. Not only could this be confusing, your recipient doesn’t get the full amount of the money transferred.
How international transfer fees work
A remittance company is a convenient way of transferring foreign exchange to a different country without opening a bank account in that currency.
For example, you need to send AUD to Australia from Singapore. Your bank account is in SGD and the recipient’s bank account is in AUD. A remittance company or a bank will handle the international money transfer in the currency exchange you need. For providing this remittance service, the company or the bank charges a fee for each transaction amount.
How international transfer fees are calculated
Fees for international money transfers vary from provider to provider.
They are determined by each remittance company or bank based on a number of factors including the transfer fee and the interbank lending market. The latter is a wholesale market where banks lend funds to one another for a specific period of time. Most of the loan maturities are for a week or less with a majority being one day.
Some banks charge as high as 8 percent of the amount of money transferred. Others may not charge a transfer fee but they may not be giving you the interbank rate.
Let’s take the example of transferring AU$ to Australia:
- For A$100, transfer fee is 1% = A$1; the amount that the remittance company will transfer is A$99
- For A$1,000, transfer fee is 0.65% = A$6.50; the amount transferred will be A$993.50
- For A$5,000, transfer fee is 0.60% = A$30; the amount transferred will be A$4,970
If I’m remitting A$2,000 to someone in Australia, I like to know that they received the full amount rather than losing some of it to fees – I prefer to pay any fees incurred on top of the amount I am sending.
Besides, it’s just easier to work with a fixed, albeit reasonable, percentage on all international money transfers. After all, even with a sliding percentage, 0.6 percent on A$10,000 works out to be a princely S$62 of international transfer fees going to the remittance company. Which is why you’ll find Revolut’s way of calculating transfer fees a breath of fresh air.
5 ways Revolut’s money remittance service is different
If you’re someone who prefers your recipient to receive the full amount, there’s an app that charges the international transfer fees as an add-on.
Revolut is a financial app founded in the UK to give customers the power to transfer money without the sky-high fees associated with traditional financial institutions. Today, it is in over 30 markets in the world, providing services such as foreign exchange, payments, cashback on ecommerce, and more.
To begin sending money to another country with Revolut, download the app and follow the instructions to set up an international money transfer. The app automatically applies the interbank rate for foreign currency exchanges; like most providers, it applies a small weekend mark-up to foreign exchange rates.
From that point, Revolut does several things a little differently from other remittance services.
#1 All international transfers are charged a fee of 0.3%
All transactions are charged a fee of 0.3 percent on the amount exchanged – lower than many other remittance service providers. For example, transfer S$120 in AUD to Australia with Revolut, and the fee is 0.3 percent (S$0.36). A close competitor of Revolut charges S$1; a local bank charges S$40.
#2 Fees are pegged to a minimum of S$0.30
Regardless of the amount transferred, there’s a minimum fee of S$0.30. This applies for all currencies that can be remitted with Revolut. So, even if you exchanged S$50 to any foreign currency, the minimum fee you need to pay is S$0.30.
#3 Fees capped at S$9
Unlike other remittance companies, Revolut caps international transfer fees to a maximum of S$9. So if you’re sending S$10,000 in AUD to Australia, the 0.3 percent fee for this remittance is S$30; but you’ll only ever pay S$9.
#4 Your recipient gets what you send
Revolut charges the money transfer fee as an add-on. If you’re transferring S$2,000 in AUD with a fee of S$6, you’ll pay S$2,006 for this remittance service. This means that you’re remitting the exact amount that you wish to send.
#5 Automatic calculation of international transfer fees
Even though the fees are easy to work out, the app automatically calculates the fee based on the amount that you’re transferring. The fee, foreign exchange rate and estimated arrival time are all shown clearly on a review page before you approve the international transfer.
A word from a customer
Patience is a lawyer who has lived in Singapore for four years: “A friend recommended Revolut to me when they launched here; I’ve used it for two years now. I was travelling internationally for work and leisure, so I gave it a try. The app offered great rates on many different currencies with no foreign transaction fees. Their international money transfer limit is high with a small fee and their exchange rate is hard to beat. If you transfer money internationally on a regular basis, the Revolut app is much easier to use than traditional international money transfers.”
Ready to pay less for remitting money?
Revolut has three customer plans. The fee schedule detailed on their website applies to all Standard plan customers. Premium plan customers enjoy one fee-free transaction per month while Metal plan customers enjoy unlimited fee-free transactions. Overall, their fees for cross border remittance services are significantly lower than other remittance companies. If you’re ready to pay less for remitting money overseas, learn more about Revolut here.
Read these if you’re wondering which neighbourhood might suit you?
