What are the Hidden Costs of Sending Money Internationally?

family planning out money to send internationally

Online money transfer: You’re paying more than you think

Does this sound like you?

Do you send money back home to the Philippines? Do you use Western Union or Remitly or someone else? Well, whatever company you do use, think about what led you to choose them and whether it’s actually the best option suited to your needs. 

Researching money transfer companies can be overwhelming. The number of companies doing online international money transfer has been growing each year and this has not made it easier for the consumer. With an abundance of options to choose from, it’s difficult to ensure that you are getting the best deal.

If you search “Money Transfer Philippines” in Google, there are so many different promotions: “first 3 transactions free!”, “USD 20 Signup Bonus”, “Send with zero fees and get a great rate of ₱54.00 on your first transaction”, “low transfer fees and great exchange rates!”. The results are endless! Each company uses promotional tactics to obtain your business, but it is not until you take a deeper dive into their normal cost structures that you realize: maybe that company is not the best economic choice. With all this “fine print” and hidden fees, you never really know where your money is going.

Most remittance companies charge you a fee for sending money internationally. That fee is the easiest part of the total cost to see. However, up to 100% of the money that remittance companies make isn’t from the fee.

Remittance companies use what is called a foreign exchange “spread” to make most of their money. How does this work? It’s relatively simple: they give you a worse exchange rate than they get themselves. 

Remittance companies typically pay the “interbank rate,” which is the rate that shows up when you google the exchange rate. For example, today the interbank rate is ₱52.10 for $1. However, Western Union gives you an exchange rate of ₱49.65 for $1. If you send $10, Western Union only needs to send $9.52 (since $9.52 x ₱52.10 = ₱496.50) to get you your quoted receiving amount. They keep the difference.

This means that most of the cost of sending money internationally is hidden, in the form of the exchange rate.

When most people send, they focus on the fee, but that amount composes only about 30% of the total cost that you’re paying in typical cases.

For me, there is no better feeling than buying something on sale (!), and with SendFriend’s combination of low fees and high exchange rate, you can feel this whenever you send money! Our “spread” is only 1% of the total amount you’re sending, compared to Western Union at nearly 5%.

There are hundreds of blog posts with comparison charts with various money transfer companies, yet those only seem to make things harder. When making a decision, I love knowing that I am making the right choice. It is not until I complete hours of independent research, reading testimonials, and talking to friends do I ever feel sufficiently knowledgeable about the topic – I hate being surprised by an overlooked factor. 

The industry standard is a give-and-take between the fee you pay and the amount of time it takes for the money to reach the recipient; however, at SendFriend, we don’t believe competitive prices and short processing times should be mutually exclusive. Yes, the cost of sending money had gone down over the last few years, but SendFriend is dedicated to creating an affordable money transfer platform that ensures you get the best deal every time. It pays to be an informed customer; companies with seemingly low fees may be taking your money through a very low exchange rate and vice versa. 

Though selecting the right money transfer platform for you may be a stressful task, SendFriend is here to take that stress away and treat you like a friend for the next time you send.