If you have ever had to make an international payment, or transfer money abroad, then you will know all too well how expensive it can be. This is primarily because both the sender and the recipient banks charge fees for handling international payments and boy oh boy, can these fees be substantial with SWIFT Transfers.
To make matters more confusing, fees and charges vary greatly between banks. Amid these rising costs, we now have money transfer and remittance operators where you can get the best exchange rate and avoid these high costs, such as getting the best remittance rates to send money from Singapore to India.
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Moving Swiftly…
The reasons for this are that all banks charge their customers each and every time they use the SWIFT system. SWIFT (Society for Worldwide Interbank Financial Telecommunications) is essentially a giant, international, inter-bank networking system which the banks use to exchange information and crucially, transfer international payments between themselves. The SWIFT system is vast and impressive. It has successfully allowed customers to move money around the world for decades and still handles a mind boggling 35 million transactions per day.
However, recent years have shown the tried and tested SWIFT system to perhaps be a little dated and a number of fin-tech challengers are now leading the way offering both cheaper and much swifter ways to make international payments. Maybe the end is finally nigh for the swift transfer system.
But before we get into that, let’s pause to take a look at just how expensive SWIFT international payment fees can be when using some of the biggest and best known banks across the world.
USA
Chase – Now part of the JP Morgan Group, Chase offers a fixed $5 fee for transfer amounts of less than $5000. There is no fee for transfers of more than $5000.
Bank of America – BOA charges a fixed $45 fee for international payments made in USD. However, there is no fee for international payments made in a foreign currency.
UK
Lloyds Banking Group – As a happy hangover from the UK previously being a member of the EU, there are currently no fees for making international payments in Euros. This may well change in the coming years as the post-Brexit bankingscape takes form and the EU reforms its own banking regulation.
However, all other international payments carry a fixed charge of £9.50 ($13 USD) plus an additional of either £12 or £20 ($27 USD) depending on the “zone” of the recipient bank.
This makes Lloyds bank international transfer fees amongst the highest in the UK banking industry. Note that since the controversial acquisition of HBOS in 2008 the Halifax is a subsidiary brand of Lloyds Banking Group and are now subject to the same fee scale – the bank that once boasted of “giving customers Xtra”, now seems to be charging them Xtra instead.
HSBC – HSBC has an extensive international presence and so you can transfer money between international HSBC accounts free of any fees. HSBC also offers £0 transfer fees on Euro payments within the EU and EEA. All other international payments are subject to a fixed fee of either £4 ($5.50 USD) or £9 ($12 USD) depending on how you make the transfer.
Australia for SWIFT Transfers
Commonwealth Bank of Australia (Commbank) – The Ozzie banking behemoth charges nice and steady international transfer fees of $6AUD ($4 USD). However, for transfers from an AUD account in South Pacific currencies (FJD, PGK, SBD, VUV and XPF) there is no fee.
India for SWIFT Transfers
Punjab Bank (PNB) – International money transfer fee scales throughout India can be quite hard to wrap one’s head around so please do pay close attention!
With PNB, international transfers are charged at 0.125% min ₹500/- + ₹100 ($1.35USD). Then there is an additional fixed SWIFT charge of ₹100 and finally, a Goods and Services Tax (GST) is also charged on top of this.
HDFC – Thankfully, HFDC’s charges appear thankfully to be a bit more straightforward than PNB’s and interestingly, they also benchmark their fees against the $USD. There is a flat fee of ₹200 ($2.69) for transfers with a value of up to $500 USD rising to ₹500 ($6.30 USD) for transfers of over $10,00 USD.
EU for SWIFT Transfers
Note that if you are transferring internationally within the Euro-zone (ie, a Euro to Euro transfer inside the EU) then there are no banking fees. Some EU banks (even outside the Euro zone) also offer fee free transfers in any currency between EU and EEA member states.
BNP Paribas – The French banking titan operates a rather detailed international fee structure but the range is pretty much fixed fees of between €3.90 ($4.40 USD) and €20 ($22.50 USD).
ING – Dutch mega bank rabobank keeps things very simple and charges a fixed fee of €6 for intentional payments.
The Hidden Costs: Currency Exchange Costs with Banks for SWIFT Transfers
Now you have seen some examples of fees, let’s take a look at the hidden costs of international banking transfers. Whenever you transfer from one currency into another, you need to take into account the exchange rate.
According to XE.com the current rate for $1USD is €0.89 or £0.74. Therefore you may be forgiven for thinking that the bank would honour this and that if you sent your friend in Paris $1, they would receive €0.89. However, in reality the banks will almost always apply an alternative exchange rate which favours them – they are effectively charging you for changing currency and taking a percentage cut.
To offer up some real life examples, I just called my bank in the UK (a subsidiary of HSBC) and they confirmed that that if I send my Parisian girlfriend £100 GBP to her French bank, she would NOT receive the €119 I would expect, but would instead receive around €115 (minus any fee that her bank decides to charge).
The other “hidden cost” of making international money transfers is the fee that the recipient’s bank will apply. To put this into an example you may be charged $4.50 for making the transfer, and then the recipient will also be charged an additional €6 for accepting it.
Worst Banks for International Money Transfers
In this post we have seen some of the best and worst offenders for making a bank transfer abroad. In general, the US banks are very competitive offering low fees in a demonstration of the country’s international financial influence and reach. India’s system can be complicated – the addition of GTO can seriously confuse some account holders but there are still some well priced banks operating in the country.
It may come as a surprise to some of you to see some of the UK banks charging such hefty fees considering the City of London’s central role in international banking, but having now seen the fees, it should come as little surprise to learn that fin-tech startups and challenger banks are seriously eating into the big banks market dominance. Startups like Wise and Monzo have been enabling faster and cheaper international payments to UK customers for a number of years and are set to keep on growing.