Sending money across borders — three costs, not one

When money arrives from abroad, attention goes almost entirely to the exchange rate. The rate is usually the smallest of three costs on that journey.

Cost one — the sender's fee

Whoever sends pays a fee to their bank or transfer service. For a bank transfer within Europe that is typically fixed and independent of the amount; for a money transfer service it is often a percentage.

There is a choice here that is easy to miss: who bears the charges. If a transfer is sent with all charges on the recipient, an intermediary bank can deduct its cut along the way — so the amount that lands is smaller than the amount sent, with nothing to do with the exchange rate at all.

Cost two — the incoming payment fee

This is the item that surprises the most people, because it does not appear in any rate table.

When foreign currency reaches your account, the receiving bank charges a fee for processing it. That is separate from conversion and is charged whether or not you convert anything.

On large amounts it is negligible. On regular small transfers — monthly support, freelance invoices, a pension from abroad — it is often a bigger cost than the difference in exchange rate between the best and worst bank.

The practical consequence: comparing banks on the rate alone gives the wrong answer here. A bank with the best buy rate can be more expensive than one with a worse rate and a lower incoming fee, if the amounts are small and frequent.

Cost three — the conversion

Only now does the rate enter. When foreign currency is converted, the bank applies its own buy rate, which sits below the published reference rate.

The gap between those two numbers is the price of conversion. On €1,000 it typically runs from a few euros at a competitive bank to twenty or more at an uncompetitive one.

What most people do not know

You are usually not obliged to convert on arrival. Money can sit in a foreign-currency account and be converted when you choose — or not converted at all, if you spend it in that currency.

That matters in two situations:

• Regular income in a foreign currency. Converting each transfer separately pays the spread every time. Accumulating and converting less often pays it less often.
• A known future payment in the same currency. Converting to spend and then converting back is paying the spread twice for no reason.

How to compare honestly

Add the three costs on the amount you actually move, at the frequency you actually move it. For a single large transfer the rate dominates and it is worth shopping for. For a small monthly transfer the fixed fees dominate and the rate barely matters.

That is one calculation, and it usually points somewhere different from the rate table.