Beware of banks ripping you off on foreign currency wire transfers!
I had the unfortunate experience of wiring a large sum of money to Japan yesterday to pay for part of my children’s education for the next school year. The amount was large (about 3 million yen) so even minor fluctuations in the rate meant I would be paying, or saving, hundreds or thousands of dollars.
First of all, setting up a wire transfer through Wells Fargo (and I’m guessing the other major banks as well) is anything but quick and easy. The fees are large if it is a one-time wire so they encourage you to set up a repetitive wire transfer to make it a bit cheaper. To do so requires filling out pages of documents. I spent more than an hour with the banker. Then my wife had to go into the bank to sign papers too. I then had to send two faxes and fill out more paper work when things weren’t set up correctly. I also spent more than a half hour on the phone.
At long last things were ready to go. I called to make the transfer. The Wells Fargo agent processed everything and then said she was going to conference in a currency exchange agent. He got on the phone and quoted a rate of .0108. She finalized things and asked for my approval. I asked for a minute to run some numbers because things didn’t seem right.
The internet was quoting me a current rate of .01048. I ran some numbers and figured that the rate of .0108 was going to cost me about $1,000 more than .01048 so I told the agent that. She asked if we should try again. WTF? Try again? What does that mean in this context? I was trying to make a wire transfer of funds not roll dice in a casino.
I answered that if trying again could result in a better number then yes we should try again. She got the agent back on the line, told him I was unhappy with his quoted rate, and asked for a better exchange rate. He said, “How about .0106?” I couldn’t believe my ears. Was I dealing with a major bank or a loan shark? My hands were pretty tied as I had to get the money to Tokyo. I asked for .01048. He said no. I asked for .0105. He said he could only give me that rate if I was wiring more than 5M yen. So I was stuck with .0106.
Some important points to note:
1) If Wells Fargo, or likely any bank, tells you that wiring money to another country will cost you $15 or $30 or whatever their service fee is do not believe them. They will ream you on the rate so that they will make hundreds or thousands of dollars on the transaction.
2) Do not accept their initial rate! Had I accepted their initial rate I would have paid more than $600 than I ended up spending. I got taken by Wells Fargo, but it could have been worse.
3) Avoid wire transfers, or any conversions of dollars to yen, in the USA. The banks in the US will legally rip you off.
Foreign currency exchange can be a scam. The middle man is doing next to nothing for huge profits. The amount of the profits are determined by the desperation and degree of ignorance the person needing the other currency holds.
The stage coach is heading off with my money as fast as it can in the opposite direction from me.
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June 27th, 2009 at 3:01 pm
Thanks for the advice. I recently purchased yen through Wells Fargo for my upcoming trip and found that amongst all the banks offering this service, their conversion rate was consistent. They won only by merit of their shipping cost ($8.00 versus $14.50 elsewhere). I wonder if rates are better at NRT but I haven’t been able to find any information. I will continue to research. In the meantime, I hope you don’t mind if I link your story to my blog.
Thanks,
Shiira
June 27th, 2009 at 3:14 pm
The rates are better in Japan at NRT. See: http://www.2think.org/dollar-yen-change.shtml
June 27th, 2009 at 6:01 pm
Do remember that the rate you see on the Internet and in the papers is the inter-BANK rate. You will never get a rate equal to it unless you’re exchanging huge (as in hundreds of thousands or millions of dollars) sums of money.
Still, as the blogger mentioned, it never hurts to try to get as close to that number as possible.
June 27th, 2009 at 7:15 pm
Thanks for the advise. I’m not likely to need to wire money overseas anytime soon, but it’s always good to know.
August 28th, 2009 at 9:34 am
It doesn’t suprise me that yet another person wants something for nothing. That makes sense, you earned your money and should do everything you can to keep as much of it as possible. However your views of how you think things should work are like that of a child planning its 6th birthday party. Ideal and fatastical. I used to be an FX trader (no not with Wells Fargo, but another large bank)and we would hear this all the time.
1)You mentioned the settup process was tough and required you “filling out pages of documents. I spent more than an hour with the banker.” Well I’m not sure if you’re up on current events but very bad people need to move money around to do the bad things that they do, and they generally wire it. You may have heard of a few things like the Bank Security Act or the Patriot Act. Well these are are set up by your government to protect the country from terrosits and the like. I wouldn’t do business with any bank that DIDN’T do its due deligence protecting our nation. While I’m talking about this, do you have any idea how much it costs to opperate this sort of transaction within goverment guidlines? We are talking about a very large compliance department. Do you have any idea how many people it took to process your paper work and ensure you had no bad intentions with your transactions according to US law? I bet you don’t. =Costs
2)”The internet was quoting me a current rate of .01048″ here we go… Then call the internet to make your transfer… See who will give you that price: NOBODY!
That is an interbank spot rate. That is the rate that traders buy and sell MILLIONS of dollars worth of FX. Next time you buy a car go in and tell them you saw on the internet that it cost Ford $15,000 to make the truck and you want to pay $15,000. Or the next time you fill up your tank tell them you saw barrels of oil going for $45 dollars and you want gas at that price. Try calling your broker and let them know you aren’t paying any fees or points from now on. Cmon… be realistic. I’m not sure what business you are in, but you made your @$30,000 for your daughters tuition doing something right? By charging your customers a premium in your market. Well this is no different. What would you say to the next person that walks in your business and asks you to opperate at a loss for them?
I didn’t think so.
3) I can only imagine that she offered to call back to check the rate again because it is always changing, but I’m not sure on this. I doubt a big bank like that would allow for that much of a difference in judgement. (Mine didn’t years ago, even in the good old days.)
4)”Avoid wire transfers, or any conversions of dollars to yen, in the USA. The banks in the US will legally rip you off.
Foreign currency exchange can be a scam. The middle man is doing next to nothing for huge profits. The amount of the profits are determined by the desperation and degree of ignorance the person needing the other currency holds.
The stage coach is heading off with my money as fast as it can in the opposite direction from me. ”
-Cute, but my only response to that is: Don’t believe everything you read on the internet folks. /Including my post. Do your own research.
5) If you could have found a better price you would have. So false buyers remorse yourself all you want but posting dubious info and poor advice is not the best way to handle it.
If I look at your final price: .0106 – .01048 = .00012 on $31,800 USD. Not a bad spread on @32k. .00012 * 32,000 = $360 USD Terrible price???!!! watch out for the scam people, what are you even talking about? That conversion looks pretty darn fair to me.
Please stop spreading poor information about things you have no clue about and bothered doing no reasearch on, because it really shows.
August 31st, 2009 at 6:02 pm
You are missing the point Old FX Trader. The point is transparency.
When someone in business says they will do something for you for $20, that is what you expect to pay and you proceed with the transaction if you are willing to pay $20.
Likewise, when they say it costs 3%, you proceed with the transaction if you are willing to pay 3%.
What isn’t transparent is when they say fill out all this extra paperwork (which ultimately took hours of real time and weeks of waiting for a pin number) to reduce the cost from $30 to $15, and then at the last minute, when there isn’t time to use another bank to wire the money, they tack on 3% without telling you. When questioned they immediately drop the additional fee from 3% to 1%.
These things “I have no clue about” are things I experienced first hand, not you. The local bank manager even agreed with me that they screwed up in not providing adequate disclosure from the outset and trying to sneak a higher commission (totaling thousands of dollars) past me.
As far as no one “NOBODY!” giving market rates, that simply isn’t true. I get the market rate every time I withdraw yen using my ATM card from the exact same bank. They charge me $5 per transaction though, something I’m fully aware of. They should offer the same clarity with their wire transactions. http://traveljapanblog.com/wordpress/2009/08/changing-dollars-into-yen-2009-update/