Buyers who are looking to purchase property in a country where they aren’t currently citizens or legal residents will almost certainly have to move funds into that country — and will have to pay a host of fees to transfer their money. Are all of these fees necessary, though? And are consumers paying too much for the charges that are unavoidable?
No and yes, says Mike Ward, CEO of USForex, a company that specializes in transferring large amounts of funds across borders. Companies like USForex (a subsidiary of OZForex, based in Australia), Moneycorp and Currencies Direct exist to serve international consumers who want to purchase real estate or make sizeable investments in other countries. These kinds of businesses have had a presence in nations such as Canada and the United Kingdom for a while now, but have recently expanded their operations into the U.S.
Ward argues that consumers tend to overpay when they use traditional commercial banks for these transfers, in part because those institutions almost always saddle them with unnecessary fees.
“Banks can execute those transfers, but they won’t provide guidance and they’ll charge more than they have to,” he said. “There are lots of fees, but there are also lots of other options.”
According to Ward, these are the charges that typically pop up when transferring large amounts of money across borders:
▪ Margin or spread fees: These fees, which are unavoidable, are assessed on the actual currency conversion. However, conventional banks will typically charge more basis points on the transactions, amounting to about 3-5 cents per dollar, whereas the charges from money-transfer companies usually total around 1 cent per dollar.
▪ Wire transfer fees: These generally run between $20-100. Both commercial banks and money-transfer businesses can charge these fees, though they’re sometimes waived by the latter.
▪ Intermediary bank fees: These are charged by financial institutions that help facilitate money moves from a bank in Country A to a bank in Country B. Working with a company that focuses exclusively on international fund transfers can help consumers avoid these fees altogether.
▪ Delivery fees: A somewhat nebulous transactional charge that’s either reduced or done away with when consumers don’t work with traditional banks.
Obligatory caveat emptor note: While they focus exclusively on moving funds internationally financial transfers, working with money-transfer companies may not always be a superior experience to doing business with commercial banks. Make sure you and your clients perform your due diligence before going with either approach.