What does 0% commission money transfers mean?
When a currency exchange business advertises “0% commission money transfers,” they are offering customers no upfront transfer fees when you send money with them internationally. This is also commonly advertised as “no transfer fees.”
This may seem like a good deal; 0% commission implies that they are providing the service to you free of charge.
However, it is misleading, as the cost of their service is often claimed within hidden fees and marked-up exchange rates.
How do currency exchange businesses make money on international money transfers?
Currency exchange businesses make a profit by tacking on fees when they change money from one currency to another – you may have noticed this firsthand strolling around the airport and comparing the various currency rates listed at different currency exchange kiosks.
Some currency exchange businesses, like banks or FX traders, also offer international money transfers, allowing you to move money from one country to another for reasons like paying cross-border businesses or sending money to a relative abroad. Just like in the tourist industry, currency exchange businesses will charge you for facilitating the transfer on your behalf.
This is performed through:
- Upfront money transfer fees
- Hidden fees contained within the rate of exchange
Currency exchange and transfer businesses can use either of these methods individually or combined to make a profit from transferring cross-border payments.
Make sure you research the bank that you are sending the money to, as they may charge you transfer fees even if the bank you use doesn’t.
What types of businesses offer 0% commission money transfers?
High street banks and electronic money institutions offer international money transfer services for 0% commission. While they may advertise this offer, remember that they will likely increase the rate of exchange in converting your currency to another in order to make a profit from your business.
High street banks
The main banking institutions in the UK, such as HSBC, Barclays, and NatWest, will be able to place international money transfers on your behalf as one of their many financial services. Banks process these transfers on the SWIFT network, which can take between 2 and 5 days to process, and often place limits on how much you can transfer in one day.
Electronic money institutions (EMIs)
You can also process money transfers with EMIs like CurrencyTransfer, which specialises in international money transfer and currency exchange. EMIs transfer money faster, often within a few hours or days, on the SWIFT network for international payments or SEPA for European payments. They also do not impose any restrictions on transfer amounts, meaning you are freer to move your money.
Is there a way to transfer money without a fee?
No, there are no ways to avoid fees when processing international money transfers. While the sound of a “0% commission” claim or “no money transfer fee” sounds alluring, this is only a marketing scheme. In reality, currency exchange businesses turn profits by hiding fees in the rate of exchange itself
Let's look at this in practice. Say you want to move £5,000 from GBP to Euro, and the current currency exchange rate mid-point is currently set at £1 GBP to €1.40 EUR.
One currency exchange service offers no money transfer fees, but sets its exchange rate at £1 GBP to €1.35 EUR.
At the mid-point exchange rate, £5,000 becomes €7,000. But through the currency exchange service, £5,000 becomes €6,750, and they keep the €250 difference as payment for their services.
Are 0% money transfers safe?
These types of money transfers are generally considered safe. They can, however, be misleading, as customers may think that they are receiving the service for free when there may be hidden costs within the exchange rate or surprise fees from banks receiving the payment.
As a rule of thumb, the best way to check whether a financial institution is safe to use is by checking whether it is FCA-regulated.
How can I get the best money transfer deal?
There are several steps you can take to get the best money transfer deal for your international payments.
1. Compare providers
The first step is to compare all of the different money transfer providers available to you. When assessing the merits of each, you’ll need to consider:
- Their upfront money transfer charge (if they have one)
- The exchange rate they offer
- Any potential hidden fees
- FCA approval so that you know your money transfer will be safe.
To make this easier, you can use a comparison tool from a reputable EMI like CurrencyTransfer, which keeps track of a variety of currency exchange variables like transfer limits, supported currencies, and transparency.
2. Calculate the total cost
When you have gauged the key variables of currency exchange providers, nominally transfer fees, exchange rates, and hidden fees, you can work out the total cost of using the service, which can help inform your decision on which provider to use.
Transfer fees and additional hidden fees are usually disclosed to you by the provider through their own currency exchange calculators.
To work out the profit made through exchange rates, calculate how much your transfer should convert to based on the mid-point exchange rate (which you can find on Google) and then subtract the amount that you would receive by using your provider’s rate.
3. Time it right
Exchange rates aren’t set in stone. They fluctuate due to various reasons, like supply and demand, inflation, and global events.
That means that, if your transfer isn’t urgent, it could be favourable to hold off until exchange rates become more favourable for you, i.e. your personal return is greater from the transfer process.
Or, if you are in need of an immediate fast money transfer, you should also factor in how long it takes for a provider to facilitate a money transfer. For instance, banks using the SWIFT network can take up to 5 days to process the request, whereas EMIs can be as fast as a few hours.
Use CurrencyTransfer
Unlike other currency exchange providers, we pride ourselves on transparency throughout the transfer process. Not only are our rates competitive, but we are unmatched on delivery and backed by world-class support. For the best rates and money transfer experience, choose CurrencyTransfer today.
