Hidden Costs in International Money Transfers

What Are the Hidden Costs of Sending Money Abroad?

When you do international money transfers, many people look at the transfer fee when they’re done. But this fee is only a part of the total cost of your transfer. There can be extra costs like exchange rate markups, currency conversion fees, and bank fees. These extra charges can quickly raise your total expenses.

No matter if you are sending GBP to USD, transferring euros within SEPA, or making payments to the rest of the world, knowing about these fees can help you save money. It also helps you avoid any unexpected costs.

Common Hidden Fees in International Payments

Here are some common hidden fees you need to watch out for when you make international payments:

These costs might not be visible at the beginning. However, they reduce the total amount your recipient receives.

What Is an Exchange Rate Markup?

A markup is the difference between the real exchange rate, also known as the mid-market rate, and the rate you receive from your service provider. Many services claim to have low fees, but they often make money by changing the rate instead.

For example:

• The mid-market GBP to USD rate is 1.2500.
• The provider’s rate is 1.2200.
• If you send £1,000, the person receiving it will get $1,220, not $1,250.

The 2.4% exchange rate markup means you will lose £24 when you transfer money. This charge appears without a clearly shown fee.

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How Bank Transfers Can Add to the Cost

Using a bank account to send money to other countries may seem simple. But it often comes with high costs. Common banks, like HSBC, can charge fees for these transfers.

• You could pay as much as £30 in international wire fees.
• There are extra costs due to bad exchange rates.
• You may get extra charges if you use a current account rather than a foreign currency account.

Some banks in Europe or the EEA may charge fees for incoming payments. This is likely when the currency used is not euros.

SEPA Transfers: Are They Really Free?

SEPA (Single Euro Payments Area) allows people to send money in euros to other EU countries. The idea is that the cost to send this money is the same as sending it domestically.

However:

• Your bank may still take an FX margin when you exchange your GBP for EUR.
• If you are outside the EEA, you might not have complete protection under SEPA rules.
• SEPA applies only to euros and does not cover USD, GBP, or any other currencies.

Always check your provider’s pricing table and read about the fees before you send anything.

How to Calculate the Real Cost of a Transfer

Here’s how to see what you’re really paying:

1. Check the mid-market exchange rate from a trusted place.
2. Compare it with your provider’s quoted rate.
3. Find the difference and multiply it by the amount you are sending.
4. Include any fixed transfer fees, conversion charges, or bank cuts.
5. Consider the total amount you will receive, not just what you paid.

Some services clearly show the costs. But others use confusing words like “FX margin applies” or “fees may change based on where you send money.”

Tips to Avoid Hidden Costs

• Compare providers by checking the total cost, not just their fees.
• Use platforms that display the exchange rate, markup, and delivery time in advance.
• Try not to send money on weekends. Foreign exchange rates tend to be higher then.
• Use the same currency as the recipient’s bank account to avoid extra conversion fees.
• Send larger amounts less often. This can help reduce per-transfer fees.
• Look for services that are FCA-regulated when you can. This leads to better transparency.

Correct as of 17 April 2025

FAQs about hidden costs in international transfers

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