Comparing Transfer Fees: What to Look For

Transfer fees can significantly impact your bottom line, especially for businesses making regular international payments. This guide helps you understand all costs involved and make accurate comparisons between providers.

1. Types of Transfer Fees

Upfront Transfer Fee

• Flat fee: Fixed amount per transfer (e.g., £5, £10, £25)
• Percentage fee: % of transfer amount (e.g., 0.5% of £10,000 = £50)
• Tiered fees: Lower fees for larger amounts
• Free transfers: Some providers offer free transfers with hidden FX markup

FX Markup (Hidden in Exchange Rate)

• The largest cost but least visible
• Difference between mid-market rate and provider's rate
• Typically 0.2% - 5% of transfer amount
• Often more expensive than upfront fees

Intermediary Bank Fees

• Charged by banks in the payment chain
• £10-£30 per intermediary bank
• Deducted from transfer amount
• Recipient receives less than expected
• More common with SWIFT transfers

Receiving Bank Fees

• Charged by recipient's bank
• £5-£25 depending on country
• Deducted before deposit to account
• Outside your control

2. Fee Payment Options

SHA (Shared)

• You pay transfer and FX fees
• Recipient pays receiving bank fees
• Most common option
• Final amount varies based on recipient bank

OUR

• You pay ALL fees including recipient bank fees
• Recipient gets exact amount sent
• More expensive but predictable
• Good for exact invoice payments

BEN

• Recipient pays ALL fees
• Rarely used in business
• Can damage relationships
• Unpredictable final amount

3. Calculating True Cost

The Formula

True Cost = Upfront Fee + FX Markup + Intermediary Fees + Receiving Fee

Example: £10,000 GBP to USD

Traditional Bank:

• Transfer fee: £25
• Mid-market rate: 1.2700
• Bank's rate: 1.2319 (3% markup)
• FX cost: £300 (3% of £10,000)
• Intermediary bank: £15
• Receiving bank: £20
• Total cost: £360
• Recipient receives: ~$12,275

Specialist Provider:

• Transfer fee: £5
• Mid-market rate: 1.2700
• Provider's rate: 1.2649 (0.4% markup)
• FX cost: £40 (0.4% of £10,000)
• No intermediary banks: £0
• Receiving bank: £0 (local payment)
• Total cost: £45
• Recipient receives: ~$12,649

Savings: £315 per transfer (87% cheaper)

4. How to Compare Providers

Step 1: Get Live Quotes

• Use real transfer amounts (not examples)
• Get quotes at same time (rates change)
• Include your specific currency pair
• Ask about all fees including hidden ones

Step 2: Calculate Amount Received

• Focus on what recipient gets, not what you send
• Include all deductions
• Ask providers for guaranteed arrival amount
• Check if estimate or guaranteed

Step 3: Check Transfer Speed

• Instant/same-day often costs more
• Next-day usually best balance
• 3-5 days typically cheapest
• Urgent transfers may have premium fees

Step 4: Consider Volume

• Frequent transfers may qualify for discounts
• Larger amounts often get better rates
• Monthly volume commitments reduce fees
• Business accounts have negotiable rates

5. Hidden Fee Red Flags

Warning Signs:

• "No fees" claims - FX markup is still a fee
• Unclear exchange rate - should show mid-market comparison
• Estimates only - no guaranteed arrival amount
• Fine print fees - activation, monthly, inactivity fees
• Withdrawal/deposit fees - to get money in/out
• "Best rate" promises without showing actual rate

6. Fee Structures by Provider Type

Traditional Banks

• High upfront fees: £20-£40
• Large FX markups: 2-5%
• Intermediary fees: £10-£30
• Slow transfers: 3-5 days
• Best for: Very large amounts where % fees matter less

Specialist Money Transfer Providers

• Low upfront fees: £0-£10
• Small FX markups: 0.2-1%
• No intermediary fees
• Fast transfers: Same day to 24 hours
• Best for: Regular international transfers

Digital/Neo Banks

• Variable fees: £0-£5
• Transparent FX: 0.3-0.8%
• Fast processing
• Good mobile apps
• Best for: Tech-savvy businesses, frequent transfers

7. Factors Affecting Fees

Currency Pair

• Major pairs: USD/EUR, GBP/USD - Lowest fees
• Minor pairs: GBP/AUD, EUR/CAD - Medium fees
• Exotic pairs: GBP/THB, EUR/BRL - Higher fees

Destination Country

• Europe/US/UK: Cheapest, fastest
• Asia-Pacific: Medium cost, good speed
• Africa/Latin America: Higher fees, slower
• Restricted countries: Very high fees or unavailable

Transfer Amount

• Under £1,000: Flat fees hurt more
• £1,000-£10,000: % fees start to matter
• Over £10,000: FX markup becomes largest cost

Transfer Speed

• Instant: Premium fee of 0.5-1%
• Same day: Small premium
• Next day: Standard rate
• 3-5 days: Often cheapest

8. Monthly Cost Analysis

Calculate Your True Monthly Cost:

1. List all transfers for the month
2. Note amount and currency for each
3. Calculate total fees paid
4. Include FX markup costs
5. Add any monthly account fees

Example Business: 20 Transfers/Month

Current Bank (£10,000 average per transfer):

• 20 transfers × £25 fee = £500
• 20 × £300 FX markup = £6,000
• 20 × £15 intermediary = £300
• Monthly total: £6,800
• Annual cost: £81,600

Specialist Provider:

• 20 transfers × £5 fee = £100
• 20 × £40 FX markup = £800
• No intermediary fees = £0
• Monthly total: £900
• Annual cost: £10,800

Annual savings: £70,800

9. Negotiating Better Rates

Leverage Points:

• Volume commitment: Guarantee monthly transfer amount
• Transfer frequency: Regular transfers get better rates
• Large amounts: Bigger transfers more negotiable
• Multiple currencies: Diverse needs attractive to providers
• Long-term relationship: Annual contracts get discounts

What to Negotiate:

• FX markup reduction (often 0.1-0.3% available)
• Waived monthly fees
• Free transactions up to limit
• No setup or onboarding fees
• Dedicated account manager

10. Action Plan

This Week:

• □ Review last 3 months of international transfers
• □ Calculate total fees paid (including FX markup)
• □ Get quotes from 3-5 specialist providers
• □ Compare amount received, not just fees shown

This Month:

• □ Test new provider with small transfer
• □ Check transfer speed and recipient experience
• □ Verify all fees match quotes
• □ Negotiate rates if doing regular transfers

Ongoing:

• □ Review fees quarterly
• □ Re-compare providers annually
• □ Track savings achieved
• □ Adjust as transfer volumes change

Key Takeaways

• FX markup is usually the biggest cost (not upfront fees)
• Focus on amount received by recipient, not amount sent
• Traditional banks typically 3-8x more expensive than specialists
• Calculate total cost including all hidden fees
• Regular transfers qualify for volume discounts
• Review costs quarterly as your business grows

Next Step: Use our comparison tool to see exact costs for your specific transfer routes and amounts.