Have you ever noticed that banks are very bad at letting you send your money to others; either in the next town or around the world? For one thing, they love to levy bank service charges against your account. Another thing is that the transfer might take a day, or two, or three, or more just to get there. Well if you send a lot of transfer payments for your business than wonder no more as the answer is simple – bank forex charges are a scam.
Why Would Anyone Choose a Wire Transfer?
The short answer is that it used to be one of the best ways to safely and securely send money from one bank about to another. At least before the development of new programs and fintech approaches such as financial system api’s. These are small programs which can help to reduce wire transfer fees.
Now back to the idea of what a wire transfer fee is. In the old days, a transfer would go through the ‘wire’ from one bank and then through a clearinghouse before it was routed to another bank.
A reason for their popularity was that most transfers can be completed within a day or two, though international transfers can take much, much longer. In addition, to the relative speed in sending money from one account to another, wire transfers are widely considered to be secure. Though that is changing – especially after the massive hack of the SWIFT system last year.
While things are changing wire transfers do tend to be less expensive than money transfer services. But considering how technology has progressed, wire transfers have become an expensive option to send money.
It’s all in the Fees
There is no doubting that technology is transforming nearly every industry and first among them is banking and finance. I mean you would have to have been under a rock for the past few years to not heard of the fintech revolution – one which is largely being powered by blockchain, artificial intelligence, and peer-to-peer lending. Simply put, tech is transforming payments, so much so that soon your refrigerator will be able to pay for the groceries.
Despite these advancements, banks have continued to place a premium on transfer payments and it is not the bank fees they charge for the privilege of sending your money, then it is the onerous forex rates they hide when you want to send money overseas. In some cases, these fees can be upwards of 3 percent the total cost of the transaction and this makes overseas wire transfers one of the most expensive transactions you can initiate through your bank.
Granted the banks are just trying to hold on to part of their business as technology serves to disrupt the entire industry but the fees are almost usury.
Wholesale – Retail
One common defense to this pricing is that banks are charging the retail forex rate when an account holder sends money through their account. However, this argument doesn’t really hold water as no experienced forex trader would pay upwards of 3 percent per transaction.
In fact, the hyper competitive market for forex trading has pushed commissions down to 1 ½ percent per transaction or even lower. So why is it that banks, many of which pay lower than market prices for foreign currency exchange charge so much – it’s the fees.
So, the next time that you complain to your banker about the high cost of sending a wire transfer payment, don’t take the wholesale-retail argument at face value as it is nothing more than just a smokescreen to justify the rates they are charging.
What Can You Do?
Start by looking at non-bank options to send money. Many of these are regulated businesses and the growing number of brokers which focus on helping businesses to send and receive money has grown in recent years.
Another option is to batch payments, especially if you have an overseas supplier that you tend to send payments to on a regular basis. As such, you can cut down on transaction fees by making payments only once or twice per month.
Don’t take the pat answer from the bank at face value. Remember, it’s your money and the bank fees are nothing more than just a scam.