Changing Dollars into Euros Two Ways
Go on, take the money and run…it through a wire transfer
At the start of November, Megan put the following question to Billfolders: How do you pay your rent?
For me, it’s a question that’s not a question, because I live in Italy, where only one answer is legal: I pay by wire transfer. This is a law that has been on the books for several years as a way to cut down on tax evasion; you can’t lie about how much you’re paying (which is a tax deduction), nor can your landlords (which is income), thanks to the tale of the tape.
In the U.S., this would be a hassle, but in Italy, it’s not. I can make intra-Italian bank transfers for free, like writing an electronic check. (I have no explanation for why these are two different products in the U.S., with wildly different fee schedules. I assume it stems from our cultural love of market segmentation.) The catch is, most of my money lives in the U.S., so I still have to get it to my Italian bank account.
I did this twice in mid-October, once through my U.S. bank and once through a new-ish company called TransferWise. Although I normally run from anything marketed to me as “the Uber of X,” I had to agree that international wire transfers are ripe for disruption. I mean, wires? In 2016?
Besides, TransferWise is backed by Richard Branson, the international billionaire. I assume would be my result in a BuzzFeed “What International Billionaire Are You?” quiz. (I am probably wrong. According to Forbes, I’m Jeff Bezos.)
So, how’d the test go?
TransferWise’s whole deal is that it charges a flat fee, and the exchange rate you get is the market rate — the one you could look up on a Bloomberg terminal or pull up on Google, or X-Rates, or any of a million other rate-tracking sites. The “good” rate, in other words. Not the captive “you’re stuck in an airport” currency kiosk figure.
I transferred $1000 on October 12, when the exchange rate was 1.101605. Two days later, €898.17 showed up in my Italian account. (Currency manipulation loss: $0.) I was charged a fee of $9.90. So for every dollar I transferred, I paid just under one cent to TransferWise. Had I transferred $3000, I would have paid a third of a cent per dollar.
Transfer cost per dollar: $0.01 (one penny)
So far, the only drawback I’ve found with TransferWise is that right after my first transfer, they sent me four or five excited promotional e-mails over the course of a single day. I resolved this by unsubscribing, which did not in any way harm my transfer or alter my TransferWise account. I have since made further transfers and have not been barraged with e-mails.
My bank is less transparent than TransferWise when it comes to exchange rates. I’m not going to call it out by name, because it’s my understanding that I’d have a similar experience at most U.S. banks. Heck, not just U.S. banks — you may remember a little thing called the LIBOR scandal. Or the less-well-known KIBOR scandal. Or the extremely-relevant-to-this-essay FOREX scandal. Or the plots of Superman III and Office Space. Banks love to use non-market exchange rates, and to run trades at a different time than you asked them to.
But benefit of the doubt, right? As Vladimir Lenin or Ronald Reagan might say, “Doveryai, no proveryai.”
I transferred $521.87 on October 11. This number is not round because what I actually said was “I want €450.” I was charged a $35 fee on top of the $521.87, but it was refunded on October 16 thanks to a special promotion. (Effective fee: $0.)
The transfer went through on October 12, same as TransferWise, when you may remember the market exchange rate was 1.101605. The rate my bank used was 1.1597, which they did not disclose until after I’d filed the transaction. If they’d used the market exchange rate, I would have only had to pay $495.23 to get €450. Currency manipulation loss: $26.14.
Unlike a flat fee, since this loss was baked into each dollar, exchanging a larger amount of money would have cost me more. Transferring $1000 would have cost $50.09. Transferring $3000 would have cost $150.28.
Transfer cost per dollar: $0.05 (one nickel)
Absent that one-time refund of the $35 fee, the cost per dollar would have been 11.7 cents.
What Did I Learn?
This is really irritating. The bank is charging me for exactly nothing. TransferWise moved money between the exact same two bank accounts at a fifth the price, and I could drive the per-unit cost down even further if I wanted to move more money per go. Which I’m thinking of doing, because one assumes my bank is charging me a similarly usurious manipulated exchange rate when I use my debit card internationally. As you have possibly heard on the news, the dollar/euro is hitting record highs at the moment, not seen in more than 20 years. But as you have possibly also heard on the news, the Italian banking sector is somewhat in crisis, for dumb and complicated European politics reasons everyone’s chagrined about. (I think the Italian banks will be fine, but I have recently been over-optimistic about the clear-headed moral fortitude of a nation, so grain of salt.)
P.S. I have tried PayPal in the past, before TransferWise existed, but it was five years ago. The money went through ok. They charged a percentage fee and used an in-house exchange rate higher than the inter-bank (market) one. I remember it coming out cumulatively to something like 6 or 7 cents per dollar — so lower than my bank rate if my transfer fee wasn’t refunded, but higher than either of my recent October transfers. Their policies may have changed.
Romie Stott’s essays have appeared in The Billfold, The Awl, Atlas Obscura, The Toast, and Strange Horizons. She is assiduously tracking press appearances by members of the U.S. Electoral College. If she were to run across a genie, she would defer her final wish indefinitely.