If you ask your bank how much an international transfer costs, they’ll tell you the transfer fee. It’s the right answer to the wrong question: the fee is one of three costs, and hardly ever the biggest.
The three costs, from most visible to most expensive
1. The transfer fee. The only one that appears on your statement by name. Usually a flat amount or a capped percentage.
2. The correspondent charge. Every intermediary bank in the chain takes its own. Depending on how the payment is instructed, you pay it separately (OUR mode), it’s shared (SHA), or it’s deducted from your supplier along the way (BEN) — and in that last case you find out when your supplier complains they received less than they invoiced.
3. The FX spread. The biggest one and the only one that appears nowhere. It’s the difference between the exchange rate at which the bank converts for you and the market price at that moment. It isn’t a line on your statement: it comes hidden inside the converted amount.
How to actually compare
Ignore published rate cards. Do a single calculation with two numbers:
How many pesos left my account? and how many dollars did my supplier receive?
Divide the first by the second. That’s your real exchange rate, with all the costs inside. Compare it against the observed dollar rate for the day and the difference is what you actually paid. Try it with your last transfer — it’s ten minutes with the statement and the invoice in hand.
An order of magnitude
In SendFlow’s quote tool we use, as a conservative reference for traditional banking, a spread between 3.4% and 3.75% plus a transfer fee on the order of US$40 — and we always show the lower end, so the comparison is never inflated in our favour. It’s an estimate: your bank may charge differently. Which is exactly why the calculation above is worth more than any rate card, ours included.
A cost you can’t see is a cost you can’t negotiate. Start by seeing it.