Letter 2 of 6
What a transfer really costs
Exchange rate margins and fees
The total cost of a transfer is the fees you pay plus the margin built into the exchange rate. The margin is the gap between the rate a provider gives you and the mid-market rate, and on the ACCC’s evidence it can cost more than the fee.
General information, not financial or legal advice. This guide is independent: it is not a bank or a remittance provider and names no provider. Check the current rules with ASIC’s Moneysmart and AUSTRAC.
The words on the quote
These definitions come from the ACCC’s reports on international money transfers.
- Mid-market rate
- The midpoint between the buying and selling price of a currency pair at a point in time. It indicates the wholesale rate at which financial institutions and central banks trade very large amounts.
- Retail exchange rate
- The rate a supplier offers to consumers.
- Margin
- The mark-up on the wholesale rate that a supplier builds into its retail rate. The ACCC estimates it by comparing the retail rate with the mid-market rate and multiplying the difference by the amount sent.
- Fees
- Correspondent banking fees, commissions or charges for the transfer. They are separate from the margin and may be payable in addition to it.
- Correspondent banking fee
- A fee charged by a bank the transfer passes through. It may be deducted from the amount transferred.
- Receiving bank fee
- A fee charged by the recipient’s bank, typically deducted from the amount transferred.
- Cost
- The margin and the fees together, in dollars or as a percentage of the amount paid.
Why the rate on the news is not your rate
The ACCC’s guide for consumers says the exchange rates suppliers offer are rarely the same as those reported on the news, and are typically less favourable, because they include a margin. The rates in the news are usually benchmark rates, indicative of wholesale trading, and most consumers cannot get them.
Not every supplier builds in a margin. The ACCC found one that aligned its rate with the mid-market rate and made its profit from fees instead. Either way, the useful number is the total.
A worked example, with invented numbers
To show how the pieces add up, here are two quotes for the same transfer. The currency, the “crown”, is fictional, and so is every rate and fee: none is a market rate or any provider’s price.
| Line | Quote A | Quote B, “no fee” |
|---|---|---|
| Up-front fee | A$5.00 | A$0.00 |
| Dollars converted | A$995.00 | A$1,000.00 |
| Rate offered (crowns per A$1) | 4.850 | 4.700 |
| Crowns sent | 4,825.75 | 4,700.00 |
| Margin: rate gap × dollars converted | 149.25 crowns = A$29.85 | 300.00 crowns = A$60.00 |
| Total cost: margin + fee | A$34.85 (3.5%) | A$60.00 (6.0%) |
Check: crowns sent, valued at the mid-market rate, plus the margin plus the fee comes back to A$1,000 in both columns (A$965.15 + A$29.85 + A$5.00, and A$940.00 + A$60.00). If a correspondent bank then deducted 40 crowns on the way, the recipient would get 4,785.75 or 4,660.00 crowns.
The ACCC’s 2024 report adds that fees tend to make up a larger share of the cost of smaller transfers, while the margin matters more on larger ones. Its survey found most retail transfers were under $500, so it said consumers should place significant weight on fees.
The “no fee” quote costs more. That is the pattern the ACCC warned about in 2019: some suppliers, possibly because people dislike fees, charge no up-front fee and earn their revenue through the mark-up on the rate, and services advertised as “no fee” can give the illusion that the price is lower than it is. In the ACCC’s own price data, the suppliers with the lowest up-front fees were more expensive than others.
Fees taken on the way
Because correspondent and receiving banks can deduct fees in transit, the ACCC found that people sometimes do not learn the total price until the money arrives. Its consumer guide suggests asking whether any fees will be deducted from the money you send, asking for an estimate of what the recipient will receive, and asking whether you can pay all the fees up front. It also notes the recipient’s bank may charge its own fee even when the correspondent fees are paid.
What the ACCC and the RBA found, in date order
Prices change. These are findings at the dates shown, from samples the regulators chose; none of them is a quote you can rely on today.
- February 2019The ACCC collected price data over five business days, from 6 to 12 February 2019.
- July 2019The ACCC’s final report found that prices for these services were complex, presented in different ways by different suppliers, and lacked transparency. It estimated that about A$21 billion in personal international money transfers were sent from Australia each year, and found prices in Australia high by global standards. In its sample, a consumer sending US$7,000 could have saved over A$500 by choosing the cheapest supplier rather than the most expensive of the four major banks, and the major banks were never the cheapest option for common currencies such as US dollars and British pounds. It recommended that suppliers tell customers the total price up front, including correspondent banking fees, and offer online calculators showing the total.
- July 2024The ACCC’s update report found that by 2022 all 15 major suppliers it had reviewed were fully following its best practice guidance, and that, on World Bank data to September 2023, the cost of sending money from Australia had fallen below the global average for transfers of US$200 and US$500. The major banks had reduced their prices but remained more expensive than many rivals.
- 2024According to the RBA, the ACCC updated its guidance to recommend that online calculators show the total amount the recipient will get, net of all fees, and display the expected time to arrive.
- September 2025The RBA found that sending A$1,000 to advanced economies through the major banks cost around 4 per cent, and to developing economies around 6 per cent. Through non-bank providers, transfers to developing economies cost around 2 per cent. The G20 targets are 1 per cent for retail payments and 3 per cent for remittances.
Comparing two quotes fairly
The ACCC’s guidance for consumers gives three practical points.
- Compare the total price, rate and fees together. A service advertised as “fee free” is not necessarily the cheapest.
- Compare prices at the same time on the same day, because rates move.
- If you use a commercial comparison website, some may not be independent, suppliers may pay to be promoted, and not every service may be listed.
Moneysmart adds the questions beyond price: whether the rate is guaranteed, how long the transfer takes, and how the money will be received. The full list is on the front page.