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Over the course of my travels, I have met many international travelers who are entrepreneurs and freelancers. A common issue that keeps coming up is figuring out how to get paid online, pay suppliers AND minimize the fees they have to pay, no matter where they are in the world.
Using PayPal or traditional banks for money transfers are no longer ideal. They are expensive or require in-person visits, which are not ideal for anyone. Today’s entrepreneurs and knowledge workers demand freedom from geographical restrictions and high fees. I am going to show you why Transferwise Borderless is the best and cheapest International Bank Account so you can effectively explore opportunities around the world.
Who Benefits From An International Bank Account?
An international bank account is useful for people who have personal or business ties in different countries and have a need to transact in different currencies. It is also useful for people looking to establish new connections, such as those who are traveling, nomadic and/or seeking new business/work opportunities.
Consider an entrepreneur selling her goods or services globally in different markets and platforms or a freelancer supplementing his income with online gigs through Fiverr and Upwork.
Here are some specific scenarios to consider:
- A U.S. entrepreneur buying products from suppliers in China and selling them on Amazon in U.S. and U.K. through the popular FBA program
- A translator, based in Chile, fluent in French and Spanish, offering her services to European and American customers.
- A virtual assistant, based in the Philippines, offering his services to clients from the U.S., U.K., E.U., and Australia.
- A U.K. graphic designer working online while traveling throughout South East Asia.
In all of these scenarios, these individuals can all benefit from having an international bank account; they can send, receive, convert and hold multiple currencies, as they pursue business and work opportunities around the world.
For travelers, digital nomads, freelancers and entrepreneurs exploring global work and business opportunities, Transferwise Borderless is a no-brainer.
Many travelers and expats I know, leverage the concept of geoarbitrage by earning their living with a higher value currency, such as USD, GBP or EUR while spending their money and time in countries where the currency is of lower value.
Why Is PayPal Such A Poor Option?
For many years, most of us have had to endure the high fees associated with PayPal. It was the easiest and most “convenient” option. Many of us still rely on it as the payment method for online purchases and doing the occasional money transfer.
However, the financial tech industry has been rapidly developing in recent years, recognizing that consumers today are demanding more flexibility, transparency, and simplicity. Their needs have also grown as well and frankly, PayPal has been failing to keep up.
Here is a not-so-short list why I find PayPal to be a poor option:
- Both sender and recipient must have PayPal accounts or be willing to go through PayPal for the transaction, making PayPal the middleman that gets a cut.
- PayPal does not do direct bank-to-bank transfers and sometimes takes days to facilitate international money transfers.
- PayPal does not use the mid-market exchange rates (what you find on Google). Instead, it adds an outrageous markup of 3.5% or more to the exchange rate (depending on the currencies involved). While it does not directly charge to send money internationally, this high mark up effectively becomes a very expensive “sending fee.”
- PayPal charges high receiving fees, that vary wildly based on sender and recipient countries. That’s right. PayPal gets its cut on both ends of the transaction.
- For example, a US-based PayPal account holder would have to pay a 4.4% transaction fee plus a fixed fee based on the currency received.
- After reviewing PayPal’s various country-specific websites, it’s clear there is no one clear fee structure. One thing is for sure though, the fees are outrageously HIGH.
- You are subject to PayPal acting as the arbitrator when either the sender or the recipient has an issue.
- We have all heard horror stories of PayPal freezing accounts and funds for various situations.
- Every account is usually signed up with one default currency. Holding multiple currencies is not really a thing with PayPal.
- PayPal debit card comes with multiple fees including domestic and international withdrawal fees and a foreign transaction fee (2.5%).
Head-to-Head Comparisons between Transferwise and PayPal
I’m sure your head is spinning a little by now (mine is). To put it into perspective, let’s look at a couple of specific scenarios and see how Transferwise stacks up against PayPal in real life. The data was compiled by Consumer Intelligence on January 16, 2018.
In each scenario, Consumer Intelligence made a PayPal payment from one country to another.
For simplicity’s sake, let’s look at the total fees charged by each company to the sender and recipient. For a detailed breakdown of fees and resulting payments, visit here.
Scenario 1: U.S. to France
Sending and converting USD $2000 to EUR
Transferwise Fees: $9.90 (sender only)
PayPal Fees: $75.46 (sender) + €69.76 (recipient)
By using Transferwise, the sender saved $65.56. No fee was charged to the recipient, saving him €69.76!
With the fees and marked up currency exchange involved, the recipient received an extra €121.14!
Scenario 2: U.K. to U.S.
Sending and converting 2000 GBP to USD
Transferwise Fees: £8.76 (sender only)
PayPal Fees: £65.80 (sender) + $117.47 (recipient)
By using Transferwise, the sender saved £57.04. No fee was charged to the recipient, saving her $117.47!
With the fees and marked-up currency exchange involved, the recipient received an extra $192.85!
As you can see, PayPal’s atrocious fee structure resulted in a highly unfavorable situation for both the sender and the recipient. Both were gouged by super high PayPal fees.
If both senders had used Transferwise, the resulting fees would have been very reasonable at $9.90 and £8.76 respectively. There really is no comparison between Transferwise and PayPal, in my books.
What Does A Good International Bank Account Look Like?
Like most of you, I demand flexibility, transparency and simplicity with my banking. Thinking objectively as a globe-trotting online entrepreneur and a freelancer, the following is my wishlist for an international bank account:
- Ability to do direct bank-to-bank transfers across borders
- Fair, mid-market exchange rates for currency conversions
- Low to no fees to send money across borders
- Low to no fees to receive money across borders
- Low to no fees to withdraw from the account into your traditional bank account
- Ability to receive money from anywhere
- Ability to spend money from account in the real world or online
- Ability to withdraw funds from account at ATM anywhere
- Low to no fees when spending and withdrawing money from the account
- Flexibility to hold and convert multi-currencies at any time
I have high (real world) expectations for a wishlist but why not dream big? Let’s see how Transferwise stacks up against the wishlist.
Why Transferwise Borderless is the Best Option for 2018
Transferwise is a fintech company based in the U.K. serving over 2 million customers on 750 currency routes. A quick look at their website reveals that you could transfer money to 50+ currencies. In 2017, they were moving $1 Billion every month.
When I first learn about them in 2017, I was excited by their friendly interface, simple and straightforward language, along with their customer-friendly features and benefits, of which they are many.
Let’s go through each of them and see how they stack up against the wishlist.
Why Transferwise Works Well for Sending Money
Transferwise facilitates international money transfers in a unique and innovative way. You can effectively do direct bank to bank transfers but it comes with a twist.
Let’s say you are paying for a service and you are sending money from the U.S. to the U.K. to pay for said service. With Transferwise, you are sending USD from your local bank account in the U.S. to Transferwise in the U.S. Transferwise in the U.K. then sends the equivalent amount in GBP to your service provider, to their local bank in the U.K.
No money actually travels across the pond, making for an insanely fast transfer.
The best part? With Transferwise, you pay the real-time mid-market rate (aka spot rate or interbank rate), as in what is reported by Reuters, Google and Yahoo. Transferwise does not tack on a hidden markup. There is a low conversion fee, which is visible to you before you hit “send.”
The recipient doesn’t incur fees or have to worry about using other services. They simply see their payment deposit in their bank account.
If you regularly receive payments or money from abroad from others, likewise, Transferwise would work great for the senders. You as the recipient would just see the money deposited in your local bank account as if you are paid by someone local.
Ability to do direct bank-to-bank transfers across borders – Yes
Fair, mid-market exchange rates for currency conversions – Yes
Low to no fees to send money across borders – Yes
What is Transferwise Borderless and Why It’s Great for Business and Work
In 2017, Transferwise launched a brand new feature called Borderless, which I personally find quite useful, from a business perspective. With a Borderless account, one is given virtual bank accounts in the United States, European Union, United Kingdom and Australia with real local bank details:
- USD: US account number and routing number (ABA)
- GBP: British account number and sort code
- EUR: European IBAN and SWIFT/BIC
- AUD: Australian account number and BSB code
According to the International Monetary Fund, the combined GDP of all these countries represented about 47% of the world’s economy in 2017, which is nothing to sneer at. Why limit yourself to clients in your own country?
If you can contribute value to the digital economy, you can sell your products or services in these other countries and be paid like a local.
With local bank details, you can freely target clients in these countries, while reducing administrative burden with setting up foreign bank accounts and paying unnecessary fees. This means you could receive money transfers into your Borderless account, via the virtual bank accounts as if you were a local in all these countries. Neither the sender nor you have to pay a fee to Transferwise to receive funds.
For entrepreneurs and freelancers not from these countries, it means you could open a local bank account without meeting local residency or business set-up requirements. And even if you could meet such requirements already, there is no need to visit each of these countries in person to open bank accounts.
As you can imagine, there is an instant trust factor that comes with being able to accept transfer payments using a local bank account.
With Transferwise Borderless, you could immediately seek new business or clients and be paid online easily. For freelancers, digital nomads and online entrepreneurs, even though you may not be a local in any of the countries mentioned, you can be paid like a local and that is gold.
Ability to receive money from anywhere – Yes
Low to no fees to receive money across borders –Yes
Hold and Manage 40+ Currencies
At the time of writing this article, Transferwise Borderless enables you to hold and manage 40+ currencies, which means you have the flexibility to decide when you convert the currencies in your account or simply just hold them within your account.
Being able to manage it all within the Borderless account means you can convert in real time, to take advantage of exchange rate movements at your discretion at any time, without involving a third-party service or a visit to the local money exchanger.
Unlike PayPal, you convert at the actual market rate, with no hidden, third-party markups.
Flexibility to hold and convert multi-currencies at any time – Yes
Spend Your Money with a Mastercard Debit Card
Finally, a particularly useful feature of Transferwise is the recent launch (January 2018) of its debit Mastercard, which you could use to spend your money in the real world at checkout terminals or online. This is particularly handy for world travelers, jet-setters and digital nomads.
- You could use the debit card for free with the currencies already stored in your account. Imagine yourself traveling in Thailand paying in-person with a debit card in Thai baht or paying online for a Thai AirAsia ticket.
- If the local currency isn’t already in your account, Transferwise converts it and will choose the currency that results in the smallest fee.
- Free ATM withdrawals up to £200 every 30 days
For travelers like myself traveling to different destinations, I could use Transferwise to budget my expenses accordingly, converting however much I intend to spend whenever it is convenient/advantageous for me to do so, without visiting a money exchanger AND get the best exchange rate possible. (sorry, that was a mouthful)
At the time of writing, the Transferwise debit Mastercard is only available to residents of Europe but it is expected to be rolled out to other markets in 2018. For North American markets, I’d expect that we would get them in 2018. I’m already on the waiting list, eagerly awaiting for the notification that it is available.
Ability to spend money from the account in the real world or online – Yes
Ability to withdraw funds from the account at ATM anywhere – Yes
Let’s Talk About Fees and Why They Make all the Difference
Without a doubt, the fee structure is one of the most important factors (if not the most important) that compels you to use a program like Transferwise over its competitors.
I did a comparison earlier demonstrating the huge disparity. The Transferwise fee structure is dramatically simpler and lower cost than that of PayPal’s. In fact, the straightforward nature of Transferwise is what attracted me to it in the first place.
Let’s take a closer look.
Transferwise’s ethos is transparency and simplicity, which means no hidden, gotcha fees. You are shown actual market rates when exchanging currencies. Generally speaking, the only time when there are fees is when you send money or when it is spent (and gets converted) and when funds are withdrawn to your local bank account.
Really! Low to no fees:
- No setup fees
- No monthly account fees (unlike traditional banks)
- Low to no fee for topping up the Borderless account (depending on your country)
- No receiving fees (for you or the person to which you’re sending money)
- No fees for holding multiple currencies
- No hidden markup on exchange rates
- No fee for spending currencies in account with Transferwise Debit Mastercard
When you do pay:
- A low % conversion fee when sending money internationally or when converting currency while using your Transferwise debit Mastercard
- A nominal, fixed fee to withdraw to your local bank account (£0.50 / €0.60 / US$1.30 / C$0.90)
Here are the conversion fees for some common routes (complete list here):
|USD → EUR||0.6%
|USD → GBP||0.6%|
|USD → CAD||0.6%|
|USD → INR||0.65%|
|USD → BRL||1.3%|
|USD → MXN||0.7%|
|EUR → GBP||0.5%|
|EUR → INR||0.7%|
|EUR → USD||0.5%|
|GBP → AUD||0.45%|
|GBP → EUR||0.35%|
|GBP → USD||0.4%|
A little note about the “low % conversion fee” when sending money internationally. For example, Transferwise lists a range of 0.35% to 2% for U.K. customers and 0.55% to 2.85% for US and Canadian customers. In my experience, when testing different currency conversions, most result in a fee of well under 1%, which is very, very low compared to PayPal, your credit card company or the average money exchange.
Low to no fees to send money across borders – Yes
Low to no fees to receive money across borders – Yes
Low to no fees to withdraw into your traditional bank account – Yes
If you haven’t been keeping track, Transferwise manages to check off my entire wishlist, which frankly is remarkable.
Overall, Transferwise Borderless checks all the entire list, with one small exception: the eventual rollout of its Debit Mastercard to all markets. For travelers, digital nomads, freelancers and entrepreneurs exploring global work and business opportunities, Transferwise Borderless is a no-brainer. Its transparency, flexibility and very reasonable fee structure easily make it the best option for an international bank account. Do you agree?
What You Need to Open a Transferwise Account
Ready to sign up? Click here. You will need to present valid identification documents such as a passport, national ID, driver’s license, bank statement or utility bill as well your current bank account information.