What a Remittance Actually Costs

“Zero fees” is one of the most successful pieces of marketing in financial services, because it is usually true and almost never relevant. The fee is the part they show you. It is rarely the part that costs the most.

Where the money goes

Between the amount you send and the amount that arrives, there are typically three deductions, and only one of them is stated in a way you would recognise as a price.

On a $1,000 transfer, a two-and-a-half percent spread is about Rs 7,000. A provider charging Rs 1,200 with a tight rate will very often beat one charging nothing at all, and the comparison is invisible unless you go looking for it.

The one calculation

Forget the itemisation entirely. There is a single sum that captures everything.

• Note the interbank rate on the day you sent. One search, one number.
• Multiply by the amount you sent. That is what would have arrived with no cost at all.
• Subtract what actually arrived.
• The result is the total cost of that transfer. Divide by the ideal amount for a percentage.

Worked through: you send $1,000 on a day the interbank rate is 285. Perfect world: Rs 285,000. Actually received: Rs 274,500. Total cost: Rs 10,500, or 3.7 percent.

Whether that Rs 10,500 was labelled a fee, hidden in the rate, or deducted at the other end is a question for the provider’s marketing department. It is Rs 10,500 either way.

Comparing providers honestly

Do the calculation above on the same day, with the same amount, for two providers. That is the only comparison that means anything, and it takes about five minutes.

• Same day — rates move, and comparing Tuesday to Friday compares the market, not the providers.
• Same amount — some costs are fixed and some are proportional, so the ranking can flip with size.
• Include the receiving side — a provider that arrives into an account with charges is more expensive than one that does not.
• Repeat every six months. Rates and spreads are repriced quietly and the best option a year ago may not still be.

Frequency

If the cost is mostly a fixed fee, sending less often saves real money — twelve transfers a year at Rs 1,200 is Rs 14,400 that four transfers would have cost Rs 4,800. If the cost is mostly a spread, frequency changes nothing and you should send whenever it is convenient.

Work out which one you are paying before restructuring your habits around it. People routinely batch transfers to save a fee they were not being charged.

Recording it

Two entries at their real amounts: money leaving the sending account, money arriving in the receiving one. Do not record an ideal conversion plus a separate fee expense — the arithmetic will not match your statements and you will spend an evening finding out why.

Recorded this way, the cost is implicit in the gap between the two amounts, and a year of transfers gives you a year of effective rates. That series is the evidence for every decision in this post: whether your provider is competitive, whether it has quietly got worse, and what your actual annual cost of sending money home is.

For most people who send regularly, that annual number is somewhere between one and two weeks of the money they were sending. It is worth knowing, and nobody will tell it to you.

Frequently asked questions