How to work out the true cost of sending money abroad

When you send money abroad, the fee you see up front is often only part of what you pay. The other part is hidden in the exchange rate. Two services can both advertise "low fees" and still deliver very different amounts to the person on the other end. The good news is that the true cost is easy to calculate once you know where to look.

The two ways you pay

Every international transfer has two potential costs:

• The upfront fee: a flat charge, a percentage of the amount, or both. It's shown clearly, and it's what most ads focus on.
• The exchange rate markup: the difference between the rate the service gives you and the mid-market rate. It's rarely labeled as a cost, but it often is the biggest one.

A service advertising zero fees can still be expensive if its exchange rate is several percent worse than mid-market. A service with a visible fee and a rate close to mid-market can be cheaper overall.

Working out the true cost

The simplest method is to focus on what actually arrives:

1. Pick an amount to send, for example 1,000 US dollars.
2. Look at how much the recipient will get in their currency, after all fees, according to each service's quote.
3. Use the currency converter to see what 1,000 dollars is worth at the mid-market rate.
4. The difference between the mid-market amount and what the recipient gets is the total cost of the transfer.

For example, suppose 1,000 dollars is worth 85,000 rupees at the mid-market rate. Service A charges a 5-dollar fee and delivers 84,300 rupees. Service B charges no fee and delivers 83,200 rupees. Service A costs about 700 rupees (around 0.8 percent), and Service B, despite having no fee, costs about 1,800 rupees (around 2.1 percent).

Why rates differ between providers

Transfer providers make money on the spread between the rate they get and the rate they give you. Traditional banks often have wider spreads and higher fees for international wires, and the recipient's bank may charge an incoming fee too. Specialist transfer services and fintech companies compete more on rate, but their pricing also varies by currency pair, payment method, and delivery method.

Paying by credit card to fund a transfer can add a cash-advance fee from your card issuer. Cash pickup at the other end can also cost more than a bank deposit, although it may be the only option for some recipients.

Other things that affect the cost

• Amount: percentage fees hurt more on large transfers, while flat fees hurt more on small ones.
• Speed: instant or same-day delivery sometimes costs more than a transfer that takes a few days.
• Intermediary banks: traditional wires sometimes pass through a correspondent bank that takes its own cut, which reduces the amount received.
• Currency: less commonly traded currencies usually have wider spreads.

Protect yourself

Use regulated providers, double-check recipient details before sending, and be very wary of anyone who asks you to send money abroad urgently, especially via a gift card or crypto transfer, which are common signs of a scam. A legitimate transfer is never so urgent that you can't take a minute to compare rates.

The takeaway

Ignore the headline fee on its own. Compare the amount the recipient will actually receive, measure it against the mid-market rate, and you'll know exactly what each option costs.