TransferWise is a fast-growing money transfer service that promises to be the cheapest way to send money online, internationally.
As a money-strapped backpacker and a freelance worker, I often rely on international money transfers to fund my travels, so I’m always looking for an easy-to-use option, a quick transfer and – most importantly – the cheapest way to send and receive money internationally. With that in mind, I tried out TransferWise for myself to see whether or not it really was the best way to transfer money overseas.
TransferWise Price Comparison
Why Overseas Bank Transfers Suck
Currently, there are only a few ways to transfer money internationally. You can do a bank transfer, either in your local branch, a post office or online, or you can use an online currency broker. However, both of these options have the same problem: they use high currency exchange rates and hidden fees to maximise their own financial gains, costing you more money.
If you’ve ever tried to wire money online, you probably looked up the current exchange rate to work out exactly how much money you need to send. Next, you’ll have worked out the fee that your bank wants to charge you for making your transfer – often this can be a fee of up to 5% of the amount you wish to transfer – and adjusted your amount to cover the costs. So, how can it be that after your careful consideration that your recipient got short changed?
It’s pretty simple; when you looked up the currency exchange rate you would have been shown the mid-market rate. This is the midway point in between supply and demand, otherwise known as the ‘real’ exchange rate. Unfortunately, this is not the currency exchange that banks use when making overseas transfers. Banks use an inflated exchange rate in order to ensure that they cover their own costs if there was to be a sudden change in the exchange rate (a very rare occurrence!). This means that as well as the upfront cost (which in some cases can be up to 25 GBP on a 100 GBP transfer) you pay, you will be paying hidden charges disguised in the currency exchange rate. You’ll pay more money to send your recipient less money.
This is problematic for everyone involved. As a recipient, you’ll get less money than you should receive and as a sender, you’ll be forced to pay twice to make international payments or transfer money.
Say Goodbye to bank fees
TransferWise offers a solution to this overcharging. Firstly, it actually uses the midpoint exchange rate to ensure that every penny of your money is transferred into your selected currency, so neither you or your recipient lose a penny. This transparency makes it much simpler to predict how much money you will be sending or receiving and makes managing your finances much easier. Secondly, TransferWise offers a very low service charge to make transferring money much more cost-effective. Instead of being stung by a huge flat-rate fee or an extortionate percentage charge, TransferWise’s fees start from as little as £1 (GBP) or $2 (AUD) and never exceed 0.5% of the total transfer amount. This is a huge saving to be pocketed for international families and freelance workers. Already, TransferWise is seeming like the best option to transfer money for broke backpackers.
TransferWise’s Key Features
So, how does TransferWise work?
TransferWise used to operate on a peer-to-peer model. This worked by swapping currencies with other users in different countries. So, say for example you wanted to transfer money from Australia to England, it would partner you up with other users from England who are wanting to transfer money to Australia. Their funds would leave their bank accounts and TransferWise would send the funds to your recipient’s bank account while your Australian dollars would be transferred to your partner’s recipient. TransferWise simply acted as the third party to ensure that the transactions are protected.
TransferWise works a little differently now. The company has expanded so drastically that their customer base is too big for a peer-to-peer model to work efficiently. Nowadays, TransferWise owns bank accounts across the globe. Users deposit their funds into their local branch and then the funds required are released from the relevant international branch. So, say for example you wanted to transfer Euros into AUD, you would deposit your money into TransferWise’s European bank account and the equivalent amount would be paid into your Australian bank account from TransferWise’s Australian account.
This may sound a little suspect at first, but your finances are 100% safe: you never have to worry about losing your money because TransferWise is FCA regulated. Because no money is ever converted into a different currency, it enables TransferWise to offer the lowest possible fees and ensure that you’re getting the most out of your money. If there is no-one available to swap currency with, TransferWise buys the missing currency in so that you can always transfer your currency at the best possible rate. You never have to wait around for a partner payment to be made possible, TransferWise does all the work to ensure that their service is readily available whenever you need it. This guarantees that you never have to go back to overpaying banks to make your international payments.
When you wire money with TransferWise you’ll be updated by email at every stage of the transfer. You will always know where your money is and when you’ll receive your funds. This takes out a lot of the guesswork of transferring money overseas, and unlike a traditional bank transfer you’ll be confident that you can track your exchange. This can be hugely beneficial for backpackers because you’ll know when to expect that emergency cash injection from back home and you can budget your remaining dollars to last you until then.
So far, TransferWise has exchanged over £1 billion and saved its customers a combined £45 million in banking fees. The service is growing hugely and there are currently 252 currency routes available, so it doesn’t matter where you are in the world, you can rely on TransferWise to exchange your currency into whatever you need. If you’re still not convinced by TransferWise, check out the reviews on TrustPilot. It’s racked up an impressive 5-star review from over 42,000 satisfied users.
How Much You can Save with TransferWise
As we’ve already discussed, Transferwise works on the actual exchange rate to guarantee a fairer rate than international bank transfers. On top of this, all payments are disclosed in full and paid before the payment is processed. This guaranteed rate offers huge savings for the user. But exactly how much can you save? Taavet Hinrikus, the co-founder of TransferWise, explains that while costs vary between currencies, TransferWise money transfers are eight to ten times cheaper than bank transactions and five times quicker. Whether you’re making a one-off payment or you have regular incoming or outgoing international payments, TransferWise is the most efficient and cost-effective way to manage your finances.
How to Transfer Money with TransferWise
Using TransferWise is simple and straightforward. You can make payments using the website or the app available for Apple and Android devices. The interface is straightforward and all the information you need is readily available. The app is so easy to use that it was named Apple’s “Most Innovative App 2015”. You don’t need to be technologically savvy to send a payment, and once you’ve signed up, all of your details are remembered to make sending payments even easier next time around. The sign up process is very simple and can be completed in under 10 minutes. All you need to register is your email address, home address, bank details and your phone number. You then verify your account and you can begin sending payments.
Once you’re ready to make a payment, you enter the amount you want to send and select your currencies. The fees are broken down there and then and the cost of your transfer is locked in. You’ll also see the current exchange rate and the amount your recipient will receive, as well as the date you can expect the transfer to clear. It’s clear, concise and transparent.
One of my favourite features of TransferWise is the flexibility. You can select the cheapest transfer option if your payment isn’t urgent, or pay a little bit extra to get your money processed as quickly as possible. This is a great option for worried parents who need to help out their children stuck in a sticky situation on the other side of the world.
Again, if you are choosing the ‘fast and easy’ transfer, the fees are made clear. Better yet, it’s still very affordable. This is a much lower rate than you can expect to pay if you were making a bank transfer.
Before you continue on to make your payment, TransferWise gives you the option to compare rates with other bank transfers. The standard display shows TransferWise’s rates against just two leading competitors in an easy to understand table. When entering my transfer details, TransferWise highlighted that in this instance, a cheaper option was available.
The highlighted blue text at the bottom of the screen explained how this can sometimes occur; special promotions and offers from competitors cannot always be accounted for. Again, the transparency and honesty of TransferWise ticks a lot of boxes for me. When it comes to handling my finances, I appreciate that no one is trying to pull the wool over my eyes just to get my money. The honesty makes me trust TransferWise as a company and when it comes to the sake of a few pounds, I’d opt for a company I trust over the cheaper option.
For the sake of this review, I followed through on the best rate offered and attempted to send money from the UK to Australia using Western Union to see if it was indeed cheaper. It appears that the special deal that Western Union was offered has expired and the exchange rate has changed. For the same 100 GBP, the conversion ends up with just 166 AUD for the payment receiver, which is significantly lower than the amount that TransferWise is offering.
Heading back to TransferWise, you also have the option to compare your offer against more competitors. When I did so, the painful bank charges became much more obvious and the benefits of TransferWise’s low fees became even more obvious.
As you can see, RBS – one of the UK’s biggest and most trusted banks – have the very worst offer. Using RBS will set the sender back £20 more and the receiver would be nearly $40 worse off than if TransferWise had been used. This example highlights just how important it is to shop around when it comes to making international payment – it’s worth a few minutes of research to get the most value out of your money.
Of course, TransferWise’s approach to overseas money transfers isn’t entirely original. There are a few competitors on the market who offer the same service and therefore offer the same great savings compared to traditional international bank transfers. One such competitor is CurrencyFair. TransferWise doesn’t provide comparisons against CurrencyFair’s services so I took the liberty of trying the service myself. For the same transfer amount, the recipient would receive $170.90, just a few dollars less than TransferWise.
The biggest difference to mention here is that CurrencyFair’s fees are included in the transfer amount so transferring money overseas is most cost-effective through CurrencyFair.
TransferWise Review: Does It Live Up to Its Claims?
After using and comparing TransferWise with other bank transfer options and online services such as MoneyWise and PayPal, it’s safe to say that TransferWise is undoubtedly one of the best ways to transfer money internationally. The incredible savings is obviously one of the biggest draws, but by far not the only advantage.
The quicker payments, regular status updates of your transfer and the huge number of supported currency paths make TransferWise head and shoulders above its competitors. You can rely on TransferWise money transfers for safe, quick and easy international payments. I know that I, for one, will be making TransferWise my go-to app to make international payments.
[reviews_schema stars=”5″ name=”TransferWise”]