Sending and Receiving International Payments as a Freelancer: How to Compare the Real Cost

Moving money across borders looks like a fee question: "Is it $5 or $25?" Often the bigger cost is hidden in the exchange rate. A provider can advertise a low or even zero fee and still leave you with noticeably less than the money was worth at the moment you sent it.

The way to see the true cost is simple, and it takes about two minutes per quote.

Key takeaways

• The true cost of a transfer is the fee plus the exchange-rate margin. Compare providers by how much arrives, not by the fee line alone.
• The CFPB's remittance rule requires covered providers to disclose fees, the exchange rate and the amount to be received, and generally gives consumers 30 minutes to cancel and rights to have certain errors investigated.
• That rule protects consumers sending money. Payments made for business purposes generally fall outside it, so ask your provider what protections apply.
• In our example, a $5 fee transfer cost about $43 in total, while a $15 fee transfer cost about $26, because the exchange-rate margin differed.
• Keep records of every transfer: date, amount, rate, fees and purpose. You will need them for bookkeeping and tax.

What the true cost of a transfer is

The problem

Freelancers with international clients and suppliers move money regularly, and small percentages add up over a year. Providers describe their prices differently: some quote a flat fee, some a percentage, some a "zero fee" with the cost built into the rate. It is hard to compare them without doing the arithmetic.

Why it is harder than it looks

• Fees and rates are separate lines, and the rate is easy to overlook.
• Rates move constantly. A quote from an hour ago may not be the quote you get.
• Different rules apply to different transfers. Consumer and business payments are treated differently.
• Speed and cost trade off, and so do limits and identity checks.
• Receiving is not the mirror of sending. Incoming payments can carry their own fees, sometimes charged by an intermediary bank you never chose.
• Currency matters for pricing. If you invoice in one currency and get paid in another, exchange rates affect your income.

The gap in most advice

Guides tell you to compare fees. The step that changes the answer is comparing the amount received at the same moment. To do that:

1. Look up the mid-market rate for the currency pair.
2. Ask each provider for a quote for the same amount, and note the amount the recipient gets and the total you pay.
3. Calculate what the recipient would have received at the mid-market rate, and subtract what they actually get. That shortfall is the margin, expressed in money.
4. Add the fee. The total is the real cost.

What the rules say

The Consumer Financial Protection Bureau's remittance transfer rule, which implements part of Regulation E, sets protections for consumers sending money abroad through covered providers:

• Disclosures: the provider must show the fees, the exchange rate and the amount that will be received, when you ask for a transfer and again when you pay.
• Cancellation: consumers generally have 30 minutes after payment to cancel.
• Error resolution: providers must investigate reported problems and, for certain errors, refund the transfer or send it again at no charge.

The rule is aimed at consumer transfers. Whether a payment you make for your business is covered depends on its purpose and on the provider, so ask before you rely on these protections.

The plot: three quotes, one transfer

This is an invented example with made-up quotes and providers, to show the arithmetic. You want to send $5,000 and the mid-market rate is 0.9200 euros per dollar. At that rate, the recipient should receive 4,600 euros.

	Fee	Rate offered	Euros received	Shortfall vs. mid-market	Shortfall in dollars	Total cost
Provider X	$5	0.9130	4,565	35	$38.04	$43.04
Provider Y	$15	0.9180	4,590	10	$10.87	$25.87
Bank wire	$30	0.9000	4,500	100	$108.70	$138.70

Provider X: $5 fee

$43.04

Provider Y: $15 fee

$25.87

Bank wire: $30 fee

$138.7

Invented quotes for illustration. The dollar shortfall is the euro shortfall divided by the mid-market rate of 0.92. Real quotes change minute by minute.

The provider with the lowest fee (X) did not have the lowest total cost, because its rate was worse than Y's. The bank wire had the highest cost by a wide margin. The lesson is not that any type of provider is best. It is that a fair comparison uses the amount that arrives, at the same moment, for the same amount.

A strategy for international payments

1. Find the mid-market rate first, from a reliable rate source, and note the time.
2. Get comparable quotes for the same amount and currency.
3. Compare the amount received, then add the fee.
4. Check limits, speed and identity requirements so the lowest-cost option is also usable.
5. Match currencies to your invoices. If clients pay in a currency you can hold, consider holding it and converting when the rate suits your needs.
6. Ask what protections apply to a business payment.

Step-by-step solution

1. Decide what you are doing: sending, receiving or converting, and the currency pair.
2. Look up the mid-market rate and write it down with the time.
3. Request quotes from two or three providers, including your own bank, for the same amount.
4. Calculate the total cost using the table method.
5. Check the details: delivery time, maximum amounts, verification, and any fees charged to the recipient.
6. For incoming payments, ask the payer to use local bank details in your currency if available, so intermediary fees are avoided.
7. Record each transfer: date, amount, rate, fees and the invoice it relates to.
8. Review your provider yearly, because prices and features change.
9. Talk to your accountant about how to record foreign-currency income and expenses.

Common mistakes

• Comparing only the advertised fee
• Ignoring the exchange-rate margin
• Comparing quotes taken at different times
• Assuming consumer protections apply to a business payment
• Letting an intermediary bank take a fee from an incoming payment
• Not recording the rate and fees for bookkeeping
• Sending a large amount without a small test transfer first

Frequently asked questions

What is the mid-market rate?

The rate at which banks trade a currency with each other, near the rate you see quoted publicly. It is a benchmark. Providers usually offer a rate a little worse than it.

Does a zero-fee transfer cost nothing?

No. If the fee is zero, the cost is usually in the exchange rate. Compare the amount that arrives.

Can I cancel a transfer?

The CFPB's remittance rule generally gives consumers 30 minutes after payment to cancel a covered transfer. Rules for other transfers vary, so check with your provider before you pay.

Does the rule protect business payments?

It is written for consumer transfers. Whether it covers a payment you make for business depends on its purpose and the provider. Ask the provider.

How should I record foreign-currency payments?

Record the date, amount, the rate you actually got and fees. Ask your accountant how to convert amounts for your return.

Sources and further reading

1. CFPB: Remittance transfer rule — disclosures, cancellation and error resolution
2. CFPB: 12 CFR 1005.31, remittance transfer disclosures — what must be disclosed
3. CFPB: Summary of the final remittance transfer rule

Educational content, not financial or legal advice. The providers and quotes in the example are invented. Confirm each provider's fees, rates, limits and protections before you send money, and ask a qualified professional about tax treatment.