When you need to send money abroad, you’ll most likely go to a local bank. Banks do, in fact, offer safe and convenient money transfers that usually arrive within two business days.
Wise (formerly TransferWise) is, on the other hand, a fundamentally different approach to sending money online. It matches users wishing to send money in one currency with customers in other nations looking to receive the same money through peer-to-peer technology.
So, if you need to send pounds to someone in the United Kingdom, Wise will find someone in the United Kingdom who is looking to send dollars to the United States, effectively switching your cash.
Both banks and Wise will safely transport your funds to their destinations, but which is better in terms of fees, currency rates, and speed? Continue reading to find out.
Wise vs. Banks: How They Work
Banks
To send an international wire transfer using a local bank account, you must first open one. It requires your Social Security number, contact information, and residential address to open an account at the bank.
You can then send a wire transfer overseas once you have an account by logging in to your online account.
Wise
You’ll need to register a free account before you can send money with Wise, but it’s simple to do so with your initial transfer. You can also use your existing Google+, Facebook, or PayPal accounts to sign in.
To send money, go to their website, choose the currencies you want to exchange, then enter the amount you want to send. Money is taken from your bank account and sent to a Wise bank in your recipient’s country at the mid-market exchange rate after you review your rate and charge.
Who Has the Best Rates?
Banks
While most major U.S. banks offer free domestic transfers (or waive fees for certain account levels), sending money internationally is usually the most expensive choice.
Banks impose greater fees – ranging from $25 to $85 or more, depending on the specifics of your transaction — and a wider range of expenses, including incoming, outgoing, and additional fees. They charge higher fees and have lower exchange rates than money transfer companies. They also provide your recipient fewer alternatives, usually requiring them to have a bank account in order to receive the money.
Wise
Wise’s fees vary depending on where and how you send money, but most are approximately $9.90. Overall, fees range from 0.5 percent to 1.5 percent of your transaction — and can be a little more depending on the currency you’re transferring to plus a fixed fee — depending on the currency you’re converting to.
For example, sending $1,000 to China will cost you the currency fixed fee plus 1.1 percent of your transaction ($18.79); sending $1,000 to the Philippines would cost you 0.75 percent plus the currency fixed fee ($10.92). You can simply find out how much Wise costs by going to its Pricing page.
Who Has the Best Exchange Rates?
To figure out who has the best exchange rates, let’s look at the mid-market rate. Let’s compare the prices Wise and Bank of America offer to the mid-market rate, which is the genuine exchange rate that averages the buying and selling rates of a worldwide currency — and the rate banks and transfer services use when trading among themselves.
Banks
To make a profit, nearly all banks slant the mid-market exchange rate, which means your beneficiary will get less money.
Taking the case of a transfer to Canadian dollars (CAD) as an example:
1 USD = 1.31CAD if the mid-market rate is 1.31CAD
The currency rate at your bank could be 1 USD = 1.27 EUR.
Wise
Wise offers competitive exchange rates, which distinguishes it from banks and other providers.
It is one of the few money transfer services that provides the mid-market rate. So, if you’re sending $2,000 to Canada, and the mid-market rate is 1 USD = 1.31 CAD, you’ll get that rate.
Who’s Faster?
Banks
Your transfer will usually arrive in two to three business days with major banks.
Wise
Wise receives all transfers in US dollars within one business day. However, your receiver may have to wait another two business days to see the money in their account.
Final Thoughts
You can obviously trust your bank with your money because they’ve been doing it for years. Wise, like a bank, is a regulated financial institution, with an Electronic Money Institution license from the Financial Conduct Authority.
Making an overseas transfer should be simple, and moving money around shouldn’t be prohibitively expensive. Your money will arrive quickly and safely with Wise, and neither you nor your recipient will lose out.
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