There are alternatives to using high street banks for converting and sending money abroad.
One option is to use PayPal. More and more services are cropping up, and I’m currently looking into the advantages of using one over the other.
Here are some others I’ve found.
TransferWise
Sending money abroad is deceptively expensive, thanks to the hidden fees we’ve all been forced to pay. Now TransferWise lets expats, foreign students and businesses transfer money wherever it’s needed, at the lowest possible cost. No hidden fees, no headache.
This is by far my favorite service.
Payoneer
Here’s some information about the Payoneer services:
Payoneer Prepaid Debit MasterCard Card
You can sign up for a Payoneer card, and receive your payments directly to that card. As mentioned above, you pay a flat fee per payment received, and then the funds are loaded to your card within 2 business days. You can also choose to pay an extra $3 to have it loaded within minutes. The card is held in USD, and you can use it to make purchases online, in stores, and at ATMs worldwide. As a debit MasterCard card, all purchases in a non-USD currency are converted using MasterCard’s official exchange rates, which can be estimated here. A conversion charge of up to 3% also applies.
Payoneer Global Bank Transfer Service
If you don’t want the prepaid card and instead want to get paid directly to your bank account, you can sign up for this service. It allows you to receive payments directly to your bank account in over 200 countries.
For more than 50 countries, we provide a local transfer solution. This means that funds are actually being paid to you from a local bank in your country, in your local currency. This eliminates any international transfer, and the extra charges associated with them. For the remaining 150+ countries we offer SWIFT transfers.
You pay per payment, with costs starting as low as $2.99 per payment (depending on your country). You will be able to choose the currency of payment, and if currency conversion is required, we use the official market mid-rate (at the time of transfer), and a conversion charge of 2% for the six major currencies we use, which are Euro (EUR), British Pound (GBP), Canadian Dollar (CAD), Philippine Peso (PHP), Australian Dollar (AUD) and Romanian Leu (RON). For all other currencies, a charge of up to 3% applies.
The Payoneer prepaid MasterCard works just like any other MasterCard. The card is accepted at all locations worldwide, wherever MasterCard is accepted electronically. You can use it at any point of sale location to make purchases, whether online or at retail locations. You can also use the Prepaid MasterCard at ATMs worldwide to withdraw cash. The Prepaid MasterCard may be used for online transactions wherever MasterCard is an accepted form of payment.
The fees for withdrawing at an ATM are $3.15+3% of the withdrawal amount for currency conversion.
Payoneer charges 1% of the payment amount when transferring to it.
The yearly fee of Payoneer is $29.95 per year.
Anytime money crosses borders or currencies, MasterCard and the issuing bank apply processing fees to the transaction. This is true of both POS (Point-of-Sale) and ATM transactions.
When the Payoneer card is used for non-USD transactions, a currency conversion fee takes place based on MasterCard’s exchange rate, which is adjusted regularly based on market conditions. The processing fee charged with the Payoneer card can be up to 3%. Please note that currency conversion fees are charged by all banks, and the fees charged with Payoneer cards are among the lowest in the market.
With all these options, you should also keep in mind that the two bank accounts can be set in different currencies. Be careful because with most banks, if you transfer an amount in one currency and the receiving account is set in another currency, that money will automatically be converted to the receiving account’s currency, thus incurring you a currency conversion fee and potentially an exchange rate which is not so good. To keep abreast of how the exchange rates are fluctuating, use Oanda, as I detailed in another post on this blog.
Hello Jean,
I’m about to set up an online translation business. While I finally decided what legal setup is best, I’d like to start operating with no register at all, kind of testing the service and the idea.
I guess the most simple is PayPal at first? Apparently Paypal doesn’t allow linking to Transferwise which is a bit of a pain… I was ready to use my Transferwise borderless card but I need a connecting platform such as PayPal to make payments from clients possible. My PayPal is linked to a UK account and also N26 (although they say they do not support virtual banks?) Any recommendation?
I am Spanish citizen, digital nomad with no fixed resident at the moment (latin america), and aiming at setting up this biz mainly for US clients (US).
Stripe only allow registering with an actual company registration – I could do a UK LLC although not sure about the long term tax rate and so on. Or perhaps a US LLC but not ready to make this investment yet (500$ register fee).
Sorry for the long message! just trying to make sure what’s the best option to start out. Thanks
Hola Maria,
I don’t think N26 is treated as a virtual bank since for all intents and purposes it functions like a normal bank account, including having a unique IBAN number.
PayPal, with all its problems, would probably be the easiest way to start for you.
Further on, as you you correctly state, you could set up a US, UK or even Spanish company and accept Stripe payments.
It wouldnt be better to do the money transfer by using transferwise to mintos and there to keep the money 1 month?
That could also be an option. Why do you think it’s better?
If one where to withdraw USD funds from Paypal to local Maltese banks, the funds received in EUR will actually be higher with HSBC than with BOV (I’ve tested this on multiple withdrawals).
But if I’m not mistaken credit card withdrawals use VISA’s exchange rates and not the Bank’s exchange rates. The concerned bank will then add its fees and that explains the difference in funds received.
On regular transfers it’s advantageous to use Transferwise or CurrencyFair.
Hmm, how would you explain the fact that HSBC works best in that case? It has worse conversion rates compared to BoV.
If I’m not mistaken this is how it works… Once you withdraw funds to a VISA card the USD funds will get converted to EUR by VISA(an international company that uses up-to-date exchange rates) and then VISA forwards EUR funds to your EUR bank account. So the conversion has already taken place before the funds land in your bank account.
The rates you found are only used by the bank to make currency conversion(bank transfers mainly), in this case the currency exchange is made by VISA and not by the bank.
http://www.visaeurope.com/making-payments/exchange-rates
Right. I’ve checked my account and I can see that there are no charges related to inward transfers via the VISA card. The transaction details the exchange rate used and nothing else.
When I do a SWIFT transfer in USD, BoV charges an inward fee since they charge feeds for incoming USD. This seems to support what you are saying.
What I don’t understand, however, is how doing the transfer to HSBC results in more money in your account versus BoV. If the conversion is done by VISA themselves, then the resulting EUR in the bank account should be the same for both banks, right?
I’m still trying to figure that out. It could be that the conversion is being done by the bank itself but they use exchange rates from VISA and add a conversion fee of their liking on top of the exchange rates.
Hmm, that would be pretty bad, since they are not disclosing any other fee.
You can see all BOV’s fees here – https://www.bov.com/documents/bov-tariff-of-charges.
If you search fees for other banks you’ll find a similar doc.
Yes I know and there are no fees relating to incoming VISA income in Euro.
Very easy to calculate pricing for currency conversion by comparing their buying and selling rates;
BOV: (1.1005+1.1398)/2=1.12015 which is the actual rate they are comparing to
So their charge is (1.12015-1.1005)/1.12015=1.75%
HSBC: 2.5%
Good point, thanks Francarl.
Possibly of interest, Payoneer is using Hyperwallet on their backend. If anyone is looking to build a system like Payoneer, check them out. They have some powerful possibilities. Speaking to that is the fact that they recently got acquired by PayPal in Jun 2018 (iirc). Braintree was acquired by PayPal in Sep 2013, so they might be leading to some mass integration of services soon across all three platforms.
Great share ! Thanks 🙂
Right now I’m really confuse whether use PayPal or Payoneer to receive my online payment as freelancer.. Currently I use Paypal, since at that time I don’t know about Payoneer.. PayPal takes a lot of money from difference currency exchange rate each time I need to withdraw to my local bank account.. It quite hurts ! :(..
My question is, is Payoneer currency exchange rate is better than PayPal for withdrawing money to local bank ? If yes, is it still worth ? Since Payoneer is charge some fee also as membership subscription base what I know..
PS: My PayPal base currency is USD, and my local bank account is IDR..
Thanks in advance for any advices..
Regards,
Ronny
Welcome! I haven’t used Payoneer lately so I can’t give you any advice on that comparison unfortunately.