In a nutshell, Transferwise offers one of the best foreign exchange services in the world which are available to end customers.
Unfortunately it's a bit hard to understand the details of many aspects, so I´ll try to shed some light.
If you like this article, please sign up to Transferwise using the following affiliate link:
https://transferwise.com/u/christianf7
Any payment in a foreign currency, from buying chewing gum to buying real estate, needs three steps:
- money in your local currency needs to go somewhere, where it can be exchanged
- the exchange needs to happen
- the payment to the final recipient needs to happen
Let's look at each step, using Transferwise:
- Transferwise has accounts in several countries to which you can send your local funds. It is crucial to differentiate between "collective accounts" and "individual accounts".
- "Individual accounts" are currently offered in only few currencies, today (22 May 2018) these are AUD, GBP, EUR, USD. This means you will get your very own account number, to which funds can just be transfered. If funds are received on these accounts, they are automatically associated to you by virtue of the account number used, just as if you had an own account in the respective country.
- "collective accounts" are used in all other countries. This means that Transferwise has one single account which all customers must share. As the account number is used by a bunch of people, each and every transaction must use some kind of identification. Therefore you need to use an exact reference number, otherwise a Transferwise employee will have to manually interfere, which will obvisouly delay the (otherwise very fast) process!
- When using Transferwise's private offer, you can only receive funds from yourself! If you want to receive funds from third parties, you need to sign up for Transferwise business!
- This is a very brief explanation on how Transferwise can exchange so much cheaper than your traditional bank: Unlike "real" cross border exchanges, Transferwise just exchanges information: When you want to exchange your currency "X" for currency "Y", in general someone else wants to do exactly the opposite. So instead of sending money across the globe, Transferwise will just swap your respective balances. Don't worry about the details, this happens behind the scene and just works. Sit back, relax and enjoy better rates.
- In a last step you can now use your balance in the foreign currency to either transfer money to someone in their respective local currency, or pay services using the credit card.
I recommend signing up for the "Transferwise Borderless" account, and also adding a credit card. Considering there's no ongoing fee, you can just sign up to try everything.
Some additional hints in case you feel like comparing different services:
- What matters in foreign exchange is, how many "Y" do you get for your"X"?
- It is not important how fees are called, or which fees are (supposedly) not charged.
- Note that some banks charge fees at the end of the month, so they might not be immediately visible.
- Thus, to compare, you need to know
- how many "X" left my account (altogether, including possible end-of-month fees)?
- how many "Y" did I receive (altogether, including possible end-of-month fees)?
- The compared transactions need to happen on the same day, ideally within very few minutes from each other, as otherwise any deviation could just be the result of exchange rate fluctuations
I shall hope this information makes it easier to use Transferwise's services.
If you like this article, please sign up to Transferwise using the following affiliate link:
https://transferwise.com/u/christianf7