Transferring Large Amounts of Money
Unfavorable exchange rate is the major reason for differences between declared and real fees that you pay to a bank for sending money abroad. Every bank has its own exchange rate fee that applies when you transfer money from one currency to another. You have to pay attention to the bank’s exchange rates and their currency conversion fee.
Depending on the currency, banks can charge a very high hidden fee. Have a look at Table 1 to learn how much it would cost you to send 100,000 Australian dollars to the US if you use the services of a few Australian banks.
It doesn’t cost a bank $4,000 to send $100k overseas and transfer the money. The banks are taking advantage of the fact that you, the customer, doesn’t see this fee. The fee is not declared, so the customer does not pay attention to it and think it’s somehow a normal or legitimate cost of transferring money.
Australian banks are particularly aggressive in charging hidden fees. If you transfer money from the US to Canada the fees are going to be a lot more reasonable. In some cases, as low as 1% but still for most transfers the fees are 2.5% and for more exotic currencies the fees are often a lot higher.There are a number of companies cropping up that are providing a lower cost alternative to using the banks. The main ones that we suggest for large transfers are: CurrencyFair, TransferWise .
It is possible in some cases to use a brokerage account to exchange foreign exchange and withdraw the money you exchanged in another currency.
In theory this can give you very close to inter-bank rates. It’s possible to do this for example with Interactivebrokers. You can deposit money in US dollars then trade it on the platform and then withdraw in Canadian dollars, Swiss Franc, Euro, British Pounds, Yen, New Zealand dollars and more.
There are some limitations for each currency. For example it’s not possible to deposit money in Australian dollars and then to withdraw in US dollars; however, it is possible to go in the opposite direction from US to Australian.
Note that this option of using a brokerage account is not what the account is intended for! It’s intended for trading, so it might not be the type of use the brokerage company is particularly happy with. Also it’s complicated to set up a trading environment and it also only works for you to transfer between two accounts that you own personally (you can’t transfer the money to someone else).
So this option is probably something that you do not want to consider unless you are consistently transferring very large amounts of money.Some currencies have specific options that you might want to consider that are really better options for that specific currency. We have created a number of money transfer articles for various countries which you can review here (but note that these are more focussed on transferring smaller amounts of money.