TransferWise has a unique system for moving money across borders that makes their service significantly cheaper and faster for most transfers…up to 8 times cheaper than your bank!
If you send money abroad often or even once in a while, then you must have experienced the pain that comes with shelling out high bank transfer fees. This is in addition to the highly skewed exchange rates that include all kinds of hidden fees and are never in your favour.
In my bid to minimize the fees I paid when transferring money abroad, I came across TransferWise, an international money transfer service.
Even if you are not sending money to someone abroad, TransferWise makes it easier for you to access money when you are abroad. You pay a small fee and enjoy the much better mid-market rate of exchange. The same advantage exists for freelancers who receive payments in foreign currency.
This TransferWise review covers how the service works, fees, and how they compare to their competition including PayPal (Xoom), Western Union, Money Gram, Revolut, World Remit and others.
What Is Transferwise?
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TransferWise is an international money transfer service that was launched in 2011 by Kristo Kaarmann and Taavet Hinrikus. The company is based in London and has offices in other parts of the globe.
TransferWise currently services more than 4 million customers who transfer up to $4 billion every month. They are backed by well-known investors including Richard Branson, Max Levchin, Peter Thiel, Index Ventures, David Yu, and many others.
How Does Transferwise Work?
TransferWise helps you to send money, receive money, and spend money internationally (to over 70 countries) at a low cost.
Typically, when you are sending money abroad, it involves middlemen (banks) who markup the spot exchange rate (aka interbank rate or mid-market rate) and add other hidden fees, costing you lots more in total charges.
With TransferWise, you pay a small upfront fee and they exchange the currencies at the mid-market rate which you can easily confirm online using Google, Yahoo, or Xe.com.
The mid-market rate is as close to a competitive rate as you can get at any given time and is what the banks use when conducting transactions with each other.
The bottom line is that with the transparent fee charged by TransferWise and real exchange rate conversion (which can also be guaranteed for a time period), you get the most bang for your money and enjoy significant savings.
TransferWise can afford to make things cheaper because of their innovative approach to keeping currencies local so they do not have to cross the border.
Transferwise Case Study
Let’s say you want to send $1,000 CAD to someone in the United States. Instead of transferring that money across the Canadian/U.S. border, TransferWise adds your CAD currency to their account in Canada and pays your intended recipient in the U.S. from their USD account located in the United States.
If someone else wants to do the reverse transaction i.e. pay a recipient in Canada, they pay using TransferWise funds already present in their Canadian bank accounts and keep the USD in their U.S. accounts. This strategy removes the need to transfer money across borders (transfers remain local) and thus cuts the transfer costs.
1. In order to use their services, you need to create an account. This process takes only a minute or so. After opening your account, you can initiate your transfer.
2. Enter your basic details and the information of the person who is receiving the money and their bank details. The recipient does not need to have a TransferWise account and can also be a business or charity.
3. Verify your identity by uploading the required ID and proof of address. The verification process may take up to 2 days so you should complete this step before you plan to send funds.
4. Fund your transfer using various methods including bank transfer, debit card, credit card, online bill transfer, SWIFT, wire transfer, SOFORT (Europe), etc.
When sending money from Canada, it takes 1-3 working days for your funds to reach TransferWise depending on your method of payment. Some transfer limits to be aware of are:
Direct debit CAD transfers: $9,500 CAD per 24 hours and a bi-weekly limit of $30,000
Credit and debit cards: $3,000 CAD per transfer
Local wire transfer: $1.5 million CAD per transfer
The fees you pay when sending money on TransferWise depends on –
1. The amount you are sending: A percentage is charged on the amount and it varies from currency to currency (usually 1% or less).
2. How you pay for your transfer: Direct debits cost less than when you pay with a credit card. The means of payment may limit the maximum amount you can send per transaction.
3. Exchange rate: The rate you receive is the mid-market rate which has no markup or hidden fees (same as the rate you see on Google). Depending on the currency, the rate may also be guaranteed for up to 48 hours.
For an example on fees, supposing I want to send $1,000 CAD to a friend in Australia (the currency of recipient is AUD), the following fees apply using a direct debit (cheapest option for CAD transfers).
Total fees = $9.95 CAD (~1%)
If I decided to pay for my transfer using other options, the following fees apply on TransferWise for the same $1,000 CAD amount:
Debit card: $20.09 CAD fee
Credit card: $26.29 CAD fee
Domestic wire transfer: $5.50 CAD fee
Online bill payment: $5.50 CAD fee
These fees are in addition to TransferWise’ basic fee of $6.22 CAD. For CAD transfers, direct debit is your best bet for the most savings!
Compared to other money transfer services and based on the same amount of money, I would be paying (as of this writing on May 28, 2019):
Royal Bank of Canada (RBC): Approximately $66 at an exchange rate of 1.0384 which is almost 3% worse than the mid-market rate.
PayPal: Approximately $42 at an exchange rate of 1.0303 which is almost 4% worse than the mid-market rate and includes PayPal’s currency conversion fee and the additional $4.99 CAD transfer fee.
As is obvious, TransferWise is the cheapest option in this scenario because they use the more accurate, fair and favourable exchange rate that does not include any hidden fees.
Transferwise Borderless Account
TransferWise has a borderless account that makes it easy to receive and send payments in different currencies at the real exchange rate and without fees or a minimum balance.
This account is a great option if you are a freelancer or have a business that does transactions with other businesses located internationally. When you open a TransferWise Borderless account, you get their free:
US account number and routing number
British account number and sort code
Australian account number and BSB code
New Zealand account number
What this means is that you can receive these 5 currencies and several others as though you had a local bank account and simply avoid having to convert your currencies. And, you can pay out money easily to recipients in more than 50 countries in their own currency.
You can hold over 40 currencies in your TransferWise borderless account and switch between them in seconds – on the move, in the moment, or when the rate is right.
You’ll always get the real exchange rate and the low, transparent fees.
TransferWise charges a small upfront fee if you want to convert currencies in your borderless account. The exchange rate also remains the mid-market rate.
I love the borderless account because instead of opening a US Dollar bank account in Canada and individual accounts for other currencies, this account gives you access to multiple foreign accounts that function like local bank accounts even though you reside in Canada.
When you match the borderless account with a TransferWise borderless debit Mastercard (launch planned in 2019), the fee savings can be enormous.
How Safe and Legit Is Transferwise?
TransferWise is a legitimate company that is regulated by the relevant authorities in the various countries they operate in. For example:
Canada: They are regulated by Authorite des Marches Financiers (AMF) as a money service business. They are also registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
United States: Registered with the Financial Crimes Enforcement Network (FinCEN). Their funds are held in banks that are insured under the Federal Deposit Insurance Corporation (FDIC).
United Kingdom: Authorized as Electronic Money Institution by the UK Financial Conduct Authority.
Australia: They are regulated by the Australian Securities and Investments Commission with AUSTRAC.
India: Approved by the Revenue Bank of India.
Japan: Regulated by the Kanto Local Financial Bureau and licensed as a Funds Transfer Provider.
TransferWise has a Trust Score of 9.2/10 on Trustpilot.
Transferwise Pros and Cons
Some of the pros of using TransferWise are:
Convenient and cheap transfers abroad without leaving the comfort of your home
Transparent upfront fees and a fair competitive mid-market exchange rate
No hidden fees
Versatile mobile app
Excellent customer support
A free borderless account with the ability to hold balances in over 40 currencies
Great for individuals, freelancers and businesses
Cons: Some of the complaints posted by users online include:
Account deactivation without prior warning
Delayed account verification
Limits on amounts that can be transferred
Limited support on weekends
No cash pickup option
Transferwise Vs. Others
TransferWise generally beats PayPal on the fee front because PayPal applies an exchange rate that includes currency conversion fees which can be significant. The snapshot below from TransferWise mirrors my personal findings when I compared sending money (CAD to AUD) on both platforms.
Revolut is a UK-based fintech company offering currency exchange and peer-to-peer payments. I have heard some good things about them and it appears they are launching in Canada soon.
based on their website, they will offer a service to Canadians that allows you to spend money abroad in 150 currencies using the interbank exchange rate and a 0.50% fee (plus a markup on weekends and on certain currencies).
You will also be able to send money abroad in 29 currencies at the mid-market rate at a cost of 0.50% for amounts exceeding $8,000 CAD each month.
It will be interesting to see what their full suite of product offerings will look like when they launch in Canada.
High bank transfer fees and exchange rate markups can significantly eat into the money you are sending abroad. With a service like TransferWise, you pay lower fees which are apparent upfront. This means more money in your pocket.
Whether you are paying bills, sending money to friends and family, or receiving monies for services rendered, a reliable and cheaper money transfer service will make your life easier.
Please let me know your thoughts and comments below.
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Hey, I’m Sagar from Toronto, Canada.
I am a self-taught, motivated Canadian Personal Finance Blogger who loves writing articles about Savings, Investing, Stocks & ETF reviews, Side Hustles, Frugal Living, Credit Cards and Retirement Planning. Husband. Father. Software Developer. Web Designer. Hiking Enthusiast.