3 types of fees remittance companies charge for international transactions

One marketing strategy that remittance companies often is is to promise zero-fee international transfers to their users. While those deals can sometimes help users save money, they’re not always as good as advertised.

Remittance companies charge up to 14% of any transaction that they facilitate. The trick is typically how they charge these fees. As a user, it is important to know how they charge to be able to identify the charges that may be hidden from most users.

The understanding of these charges is what Zazuu uses to determine how to recommend a remittance company to you for your transactions. In this article, we share some of the ways these companies make money from their users:

Transaction Fees

Transaction fees are probably the most transparent way for remittance companies to make money. However, there are not quite straightforward. Different companies charge their fees in different ways and for different reasons.

Some companies rely on other remittance providers to fulfill their orders. In those cases, their fees will be more expensive than that of their fulfillment partners as they want to maintain a profitable margin.

  • Flat fees: Some remittance companies charge a flat fee for transactions completed. This type of charge is often common with international bank transactions i.e. when you and the recipient in another country use the same bank account. MoneyGram and Western Union are two popular remittance companies that charge a flat fee to complete a transaction.
  • Percentages: Another way for remittance companies to charge fees is to charge a percentage of whatever amount you’re sending. For small transactions, the fee might seem small, but once you begin to transact huge amounts (>$10,000), the fees begin to balloon.
  • Graduated fees: Some remittance companies charge graduated fees that can be slightly difficult for users to understand. For instance, a company might charge a $1 fee for transactions below $1000 and then begin to use a percentage charge for transactions above that amount.

Read: 6 popular IMTOs and their transaction limits—Afriex, Azimo, SendWave, Wise, WorldRemit, Remitly

Exchange Rates

If you’re seeing an ad for zero-transaction fees for an international money transfer, then chances are you are paying for the transaction via expensive rates. In most countries, exchange rates are not regulated or standardised by a governing body. Even in instances where they are regulated, the regulators are usually stricter on banks than on remittance companies. The implication is that remittance companies can charge whatever they deem fit per time. 

Many factors affect the exchange rate a remittance service offers including market forces, economic stability, inflation, and perhaps the most important of all—profit margins. Usually, exchange rate margins will vary between 0.5% and 3% of the official rates. 

Bank and credit card fees

The method you use for making your transaction can also affect the charges you pay. Typically, bank transfers are either free or cost very little to perform. If, however, you are using a credit card, your service provider is likely to charge a more significant fee.

This is because the service provider has to rely on a number of third parties including SWIFT to process the transaction. However, certain service providers also add extra on the base charges to make some extra profit.

Parting thoughts

Fees are an important part of the remittance process as they keep the remittance companies afloat. However, for users, the primary concern is almost always saving on transactions. Knowing the kind of charges you’re up against is an important step in reducing the fees you pay. 

Keeping track of all these fees can, however, be a hassle as they change periodically. Sometimes, the fees change multiple times a day. That’s why we’ve built Zazuu — to give you a one-time view of what the current charges and fees are. 

Visit Zazuu today to find out the latest rates for your transaction.