Getting a cheaper exchange rate when transferring money overseas can help you save a lot in the long run especially when you are transferring a large amount of money or remitting overseas frequently.
Wise, formerly TransferWise, is a low-cost way to transmit money from the US and other countries to more than 80 countries. The exchange rates are among the cheapest available. A transfer can be funded in a variety of ways, including using a bank account or a credit card, but the receiver must have a bank account.
How Does Currency’s Exchange Rate Affect Remittance?
Exchange rates are significant in everyday life because they affect the value of a country’s currency. They are commonly thought of in the context of international travel. A stronger dollar in the United States means imported goods are less expensive, whether in the mall, the grocery store, or the gas station.
Exchange rates play a particularly important influence when sending money internationally. Transferring money abroad, as opposed to sending money within the same country, comes with the added burden of currency conversion.
After all, if you send someone money in a foreign currency, they are unlikely to utilize it unless their home country accepts it as well.
The amount of money you plan to send internationally, no matter how large or small, is greatly influenced by a currency’s conversion rate. Because of the poor exchange rate from your local bank, your beneficiaries may receive less money.
Why is Wise so Much Cheaper?
Banks have a lot more costs that Wise doesn’t have. Banks have to charge a higher fee or inflate the exchange rate to cover those extra costs. Even if the banks were promoting low fees for wiring, they actually give out poor exchange rates to cover their loss. The system wasn’t transparent. Hence, Wise is able to undercut traditional banks and give a cheaper cross-border exchange rate.
How Mid-Market Rates Affect Your Exchange Rates
The mid-market rate—also known as the interbank rate—is the difference between the buy and sell prices of two native currencies. In layman’s terms, this is the price that an institutional buyer is willing to pay for the currency vs the price that an institutional seller is willing to sell it for. After all, large-scale banks and financial institutions are ultimately responsible for driving real-time currency pricing.
As an example, consider the US Dollar (USD) and the British Pound (GBP/USD). If an institutional buyer was willing to pay 1.4 USD per GBP and an institutional seller was willing to sell it for 1.6 USD per GBP, the mid-market rate would be 1.5 USD/GBP.
Having said that, when you search for your desired exchange rate on Google, the rate you are provided with is the mid-market rate. However, you won’t be able to get the mid-market rate as your Bank will charge a higher exchange rate. But with Wise, you can get better exchange rates than most banks can offer.
How to Use Wise to Remit Money Overseas?
So, now that you know how much less expensive Wise is in contrast to regular banks and established money transfer firms, let’s look at how the procedure normally works.
Step 1: Enter transfer details
The first thing you’ll want to do is go to the Wise website and select the currency you’re sending and the currency the recipient will receive. If you want to send money from the United States to a buddy in Germany, for example, you’ll need to choose USD and EUR.
The amazing thing about Wise is that they are quite open about their pricing. As a result, when you enter an amount to transfer, Wise will not only show you how much the beneficiary will receive, but you can also break out the expenses by selecting ‘See Calculation.’ You will be surprised by how much you can save compared to a bank wire transfer.
If you like the rate displayed on the screen, click the ‘Get Started’ option.
Step 2: Enter the beneficiary’s information
The next step is to enter the bank account information for the person to whom you want to send the money. You’ll need to input the receiver’s complete name, BIC number, and IBAN in the same way you would for any other bank transfer. In addition, you will be asked to enter a reference number of your choice.
Make certain that these details are correct, as Wise will not be held liable if funds are sent to the wrong account.
Step 3: Select a payment method
You’ll be asked how you’d like to make the payment now. Remember that Wise is an online-only company, so you won’t be able to make a physical deposit. However, the particular payment choices available to you will be determined by your location. You can pay by ACH, wire transfer, debit card, or credit card if you live in the United States.
As previously mentioned, ACH is by far the cheapest alternative, costing only $2 each transfer.
Step 4: Transfer the funds
If you’re using a debit or credit card, all you have to do is follow the on-screen directions, as Wise will take care of the rest.
Wise will provide you with the account information as well as a unique reference number to send the payments to. It is critical that you include the reference number in your transfer; else, the transaction will be delayed. You must also confirm that the name connected with your bank account matches the name you put in Wise, and that the amount you transfer matches the Wise amount to the ‘cent’.
Step 5: Await confirmation through email
Wise will send you an email once the funds have been received after you have made the requisite transfer (or paid by debit/credit card). Wise will then carry out your transfer once they have received it.
Transparent Fees, Upfront Costs & No Hidden Fees
When transferring money abroad, every dollar counts, no matter how large or small the sum. However, obtaining the best conversion rate for your overseas transfer is not always simple—many companies utilize ambiguous methods to conceal fees or large markups in their exchange rates.
A fair and reasonable exchange rate is critical for maximizing the amount of money your recipient receives at the end of the day.
Transparent money transfer services like Wise recognize the importance of being transparent to finance and charge as little as possible while showing you the upfront costs so that you will get no surprise or hidden fees.