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.
