Need to send money overseas without hefty fees? Traditional banks often charge hefty hidden fees for sending money abroad, so it’s good to see newer companies disrupting the world of money transfers by offering the “real” exchange rate and charging much smaller fees.
One such company is Transferwise, which was founded by Taavet Hinrikus and Kristo Käärmann – two friends who lived and worked in different countries. Taavet worked for Skype in Estonia, so was paid in euros, but lived in London. Kristo worked in London, but had a mortgage in euros back in Estonia. To avoid paying hidden bank charges, they devised a plan. Each month they checked that day’s mid-market exchange rate. Kristo put pounds into Taavet’s UK bank account, and Taavet topped up his friend’s euro account with euros.
This gave them their idea to create a platform where people could send money without paying ridiculous fees. Curious about how it works? I’ve been using Transferwise for several years now and so I’ll break down how it works here:
- How Transferwise works
- What currencies can I send money to and from?
- What fees does Transferwise charge?
- Transferwise money transfer in action
- How safe is Transferwise?
- Is Transferwise safe for large amounts?
- What happens if I change my mind or enter the wrong details?
- Pros
- Cons
- Opening a multi-currency account on Transferwise
- The Verdict
How Transferwise works
When transferring money, Transferwise gives you the “mid-market rate“, which is pulled from Reuters. Before you make the transfer, you’ll see exactly what this rate is, but it’s basically the fairest rate out there. You can also set up rate alerts which will alert you when the exchange rate goes up or down, so you can send your money at the optimum time.
Banks often make up their own rates, applying a margin on top of the mid-market rate to make money. They’re not always transparent about this, so you have no idea how much you’re being overcharged by.
Transferwise charges a tiny flat fee or fixed percentage which it discloses up front, and it also shows you the various fees for sending by bank transfer, credit card or debit card.
When you send your money it is sent to Transferwise’s bank account in your home country. They then pay out your money to the recipient from their bank account in the recipient’s country.
What currencies can I send money to and from?
Transferwise allows you to send money to and from a long list of countries. To save me listing them here, click this link to see the currencies you can send money to and from.
What fees does Transferwise charge?
The fees will obviously vary depending on where you’re sending from and where it’s going, as well as what method of payment you’re using. Below you can see an example for sending $1000 from the US to the UK by bank transfer. The recipient would receive £730.05 and I’d pay a total fee of $8.26. Transferwise’s fee is $5.17 and the bank debit fee is $3.09.
To get a better idea of what it would cost you, you can view more info about the fees Transferwise charges here. The more money you send, the more the transfer will cost, as it’s calculated as a percentage of the amount you’re sending. It also varies from currency to currency.
Transferwise money transfer in action
Once you’ve signed up for a free Transferwise account all you need to do is tell Transferwise how much money you’d like to send. They show you the fees upfront and tell you when the money should arrive.
Next you fill in your recipient’s bank details – these could be your own bank details in another country or the bank details of a friend or family member.
The final step is to pay for your transfer using a bank debit (ACH), wire transfer, or a debit or credit card. Paying by credit card usually comes with higher fees than paying with a debit card. Bank transfer is usually the cheapest option but it can also be slower than paying by card.
Once you’ve initiated the transfer you can keep track of its process in your account, either in the app or online. Transferwise will usually send an email to notify you that they’ve received the money and another to say that it has been sent to the recipient.
I often use Transferwise to send money between my US and UK bank accounts so that I can pay bills back home. It’s really very simple to use and the money sometimes arrives same day.
How safe is Transferwise?
Sending money is safe with Transferwise. The company says it follows a strict set of rules set by regulatory agencies in every country they operate in. In addition, they offer bank level security and have a specialized, in-house team that looks after security, making sure that your money is safe.
Transferwise is also incredibly popular. Over 6 million customers have used them since 2011 and they handle over £4 billion every month.
Is Transferwise safe for large amounts?
It can be scary to send large sums of money overseas – what if something goes wrong?
First, you’ll need to find out if your bank has any limits on the amount you can send per day. If you’re sending the money online your bank may have a lower daily limit, so you may have to send several smaller amounts over a period of a few days. If you send in branch then you might be able to send a much larger amount.
When you sign up for a Transferwise account the company carries out identity checks by checking your photo ID and address. When you send large amounts you might be requested to send more documents, such as a scan/screenshot of your bank statement, a property sale agreement or a pay slip. So yes, it’s safe.
If you transfer over 20,000 GBP (or equivalent in your currency) you’ll be able to choose between two options: either send the money now with the current exchange rate, or watch the rate and lock it in when it’s right for you. If you have the time to spare this is generally a good option, since the slightest variation in the exchange rate can mean you lose money on the other side. If you send over £100,000 in a month you’ll benefit from a monthly volume discount.
What happens if I change my mind or enter the wrong details?
If there’s a mistake in the recipient’s details then the transfer is likely to be delayed. Sometimes the bank can still match it to the right account, but other times it will be sent back to Transferwise and then Transferwise will send it back to you.
If you initiate a transfer but change your mind, you often still have a window of time where you can cancel the transfer if it hasn’t been sent to the recipient yet. One time I realized I wanted to use a different method of payment to pay for my transfer so I hit “Cancel Transfer” and it cancelled it straight away no problem.
Pros
No hidden fees – See exactly what you’re doing to pay up front before you send.
Lower fees – Using Transferwise you get the mid-market rate and it’s cheaper than your bank – you’re only charged a small flat fee.
Handle everything online or in app – The app and website are both very easy to use. No need to visit a branch.
Multiple payment options – You can pay by ACH bank transfer, debit, credit card or Apple Pay. It’s useful if you want to get cash from a credit card, since you can use the credit card to send money to your own bank account.
Cheaper than sending with bank or PayPal – Sending by PayPal or through traditional banks is generally more expensive, so it’s definitely the cheaper option.
Quick transfers – Transfers can take as little as 2 hours or one working day – that’s how long it usually takes for me. However, if it’s a weekend then usually the money won’t arrive until the Monday, so it’s best to bear that in mind when sending a transfer. Transferwise says that it doesn’t usually take longer than two working days to convert your money, but it does vary and it can take up to a week for the money to appear in the recipient’s account. It all depends on the currencies you’re converting and the method of payment you use. Read more about the length of time here.
Cons
Sometimes transfers can be delayed – There have been a couple of instances where my transfer was unexpectedly delayed by a day. This can be frustrating if you need the money ASAP.
Paying with credit card can get expensive – If I want to send $1000 to the UK the fee would be $3.09 by bank debit (ACH) but $37.44 to pay by credit card and $11.56 to pay by debit card.
No option to pay/receive cash – If you need to pay for your transfer in cash, or you want to arrange a cash pickup for the recipient, you’re better off using a company like Western Union. Transferwise is electronic only.
Money can only be moved during normal banking hours – Bear in mind that it’s best to send your money on a week day during normal banking hours. If you initiate a transfer on the weekend or Friday night, it probably won’t be transferred until Monday.
Opening a multi-currency account on Transferwise
Transferwise also allows you to open a multi-currency account which allows you to hold and convert 55 different currencies. It’s free to sign up.
You can send money that you hold in your multi-currency account to a bank account wherever you like – you’ll just be charged a conversion fee and fixed fee like a normal Transferwise money transfer. Alternatively you can spend the currencies in your account with the Transferwise debit Mastercard, which costs $9 to apply. With the card you get low conversion fees and zero transaction fees, plus you can use it in over 200 countries. This is great for frequent travelers, although it’s worth pointing out that many credit cards these days also offer no foreign transaction fees.
You can currently also get local bank details in the following currencies:
- British Pound
- Euro
- US dollar
- Australian dollar
- New Zealand dollar
- Singapore dollar
- Turkish lira
- Hungarian forint
What this means is you can get a UK bank account number, an IBAN, US routing number and more, all in one account. Essentially you can get paid like a local, receiving things like your salary, invoice payments, pensions and profits from shares into your Transferwise account. This feature is especially useful if you’re an expat moving somewhere new and you don’t have a bank account in your new country yet. You can give these local bank details to your friends, family or an employer to get paid.
It is NOT the same as a bank account though. Your bank details are unique but they don’t represent real bank accounts, just local addresses for your electronic money account. Transferwise says your money is kept with leading financial institutions like JP Morgan Chase and Barclays, but it isn’t isn’t guaranteed by the Financial Services Compensation Scheme. (Transferwise is regulated by the FCA, however.) Since it’s not a real bank account, you won’t have access to things like overdrafts or loans and you won’t earn interest on your money.
The Verdict
I’ve been a Transferwise member for several years and I always use it for transferring money between my UK and US accounts. I’ve also used it to receive money from freelance clients as an alternative to PayPal. So far I’ve never had a problem with it and my money has never gone missing, so I’d say it’s very safe to use. I love the fact that I can monitor the progress of my transfer and I know when it’s going to arrive. On the whole it’s very quick and easy and cheaper than sending it using my bank, although where possible always try to do a bank debit to avoid the costs of using a debit or credit card. You can register for a free account here.
Questions about my Transferwise review? Leave a comment below.