If you have ever tried to make an international transfer, you will have noticed that the money received on the other side is much less than it should be. This is due not only to the direct commissions but also to the hidden commissions that are applied by the banks without us noticing . TransferWise is an app that breaks this scheme for the benefit of its user.
At a time when it is becoming increasingly common to have family or friends living in other countries, money transfers between banks of different currencies have become very frequent. It’s been a little over a month since I moved to Whistler, Canada, and one of the first problems you encounter is money. How do I convert it into Canadian dollars? How much will I be charged? Is there any way to keep my money from being lost along the way?
Before I left I consulted my bank about the conditions under which they transfer money abroad and I was scared. Of every 1,000 euros sent, approximately 50 stayed on the road. 5% disappears between commission of my bank, commission of the receiving bank and commission for exchange rate.
Using a P2P system, TransferWise is able to reduce transfer costs to a minimum
The latter is usually not specified, but banks use a lower exchange rate that benefits them when making an international transfer. I looked at a handful of other banks and the conditions were similar. The result is the same: much less money in your checking account than it should be.
TransferWise uses a very smart peer-to-peer system to save. If we are going to make a transfer in euros to Canadian dollars, put our euros in a “piggy bank”. Then wait until someone wants to do the reverse CAD-EUR operation . Instead of sending the money across borders using traditional systems, it uses each user’s money to exchange between them.
In this way, the money is waiting for us in the destination country as it has never left it. Therefore, there are no transfer fees to pay and you can apply the real exchange rate, not a hidden one, in a totally legal way.
TransferWise, the real expatriate’s lifeline
It’s hard enough adjusting to the host country to be doing stunts with the money. TransferWise comes to solve this problem with its app. The operation is quite simple for what are usually banking apps. Once you have signed up for the service, this is the process for sending money:
- You choose the amount to be sent in the source currency and the destination currency. You will automatically receive the money in the destination currency.
- TransferWise tells you how much you are saving with the transfer compared to your bank.
- In the next step, we will have to fill in the details of the recipient of the money.
- Finally, the app will ask us to specify how we want to send money abroad: by card or by transfer.
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This is where I have had some trouble, but not from TransferWise but from my own bank. The most convenient option is to use the card as if it were an online purchase. The problem is that if we are sending money to ourselves it is very likely that our bank will send an SMS to our Spanish mobile.
If we have not managed to update the phone in our bank (not all of them allow to put a foreign number), we will have to get used to changing the SIM every time we make a transfer. As an alternative you can send the money by bank transfer, but it is a slower process. With card it takes about three days to arrive while with transfer it is five days.
I have used this service a total of four times and all of them have fulfilled their promises perfectly. TransferWise charges a minimum fee of 1 euro. Playing with the transaction simulator, the best conditions are found with large amounts. The commission in these cases is 0.5% compared to the 5% usually charged by banks.
There are several technological heavyweights supporting this startup
The list of currencies and countries in which you can operate does not stop growing (you can consult it here). A few weeks ago it included the US and Canadian dollars, as well as other currencies. Unfortunately and at the moment they do not support the sending of Latin American currencies. It should be noted that TransferWise has a web service, but it is much more convenient to use the iOS app.
If you’re still not convinced by the service, maybe this will do it: behind it is one of the founders of Skype. In addition, Sir Richard Branson and Peter Thiel, two technological heavyweights, have supported this startup with their investment. It is certainly the best option for banks not to bleed expatriate savings along the way.