Long story short: if you travel overseas – you will find the new TransferWise Platinum Debit MasterCard useful. It allows you to exchange foreign currencies at the real exchange rate – the one you see on Google – saving you hundreds of dollars in fees every year.
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One of the biggest hassles and annoyances in overseas travelling is currency exchange
For a very long time, Singaporeans have been paying an exorbitant amount of fees to middlemen in the value chain who perform the simple act of converting money on our behalf.
These fees have ballooned to an average of almost S$1.1 billion dollars per year – or about S$650 per household – the equivalent of a round trip to Bangkok.
The fees can come in many forms, and the most common ones are –
- Non-transparent exchange rate markups
- Credit card annual and transaction fees to your bank
- Dynamic conversion fees
- ATM withdrawal fees
- …and many hidden fees that we only realised how much we are charged when we receive the statement at the end of the month
The transaction fees charged by our local and foreign banks are extremely ridiculous, ranging from 2.75% on Maybank cards to 3.5% on SCB cards.
In addition to losing money at every step of the way, we often face challenges like finding out where is the best place to change money, how much to change, whether you should bring more cash along for the trip or not.
TransferWise to the rescue
Don’t worry, not all hope is lost and humanity still has a reason to smile.
TransferWise – a British online money transfer service – brings the TransferWise Debit Card to Asia (starting with Singapore) after years of development and testing in other markets such as the United States, Europe, U.K., Australia and New Zealand.
If you’re familiar with their Borderless account – a free multi-currency account to send and receive money – the TransferWise Debit Card expands that functionality and adds the debit card onto their platform, allowing you to not only hold and convert more than 40 currencies at the mid-market rate stored in your wallet, but also spend them using your debit card, with no annual fees or dormancy fees.
Smart and automatic currency conversion with the lowest fees
TransferWise’s biggest draw for me is their smart currency conversion – which uses the mid-market exchange rate, or the rate you see on Google.com or XE.com, with no markups.
It’s the mid-point of the buying and selling (bid-ask) price of a specific currency, which changes all the time as traders around the world define the rates in the markets. Because it’s the mid-point of the buying and selling price, it’s considered a very fair price by most standards.
This rate is probably much better than what you see at the airport and even the most competitive money changers, as they have hidden the real charges in the displayed rates (no wonder they always look bad!). If you check Google, Yahoo Finance or XE, and you see the rates displayed at the money changer is vastly different, that difference is due to the markup in fees which you’d lose.
TransferWise is very transparent in terms of their fees and pricing, down to the dollar and cents, from their app.
Every transaction made through the TransferWise debit card also shows the breakdown of exchange rate used, conversion fee, local currency equivalent, merchant category, where and when you made the transaction.
If you have money in multiple currencies in your TransferWise wallet, TransferWise’s algorithms can automatically figure out the best and cheapest way to convert to the foreign currency you want, using multiple currencies to convert to your target currency if needed.
On-the-fly currency conversion when you pay
TransferWise can also convert your Singapore dollars to foreign currencies on-the-fly, at the point of payment.
You can safely store just Singapore Dollars in your account (which is what I do) and automatically exchange into foreign currencies only when you need to, that way you won’t need to leave small denominations of foreign currency in your wallet.
This on-the-fly currency conversion is super useful for travellers who frequently travel or those travelling to multiple countries with different currencies. You only need to store your funds in one currency and everything after, from managing multiple currencies and foreign exchange is taken care by them.
International bank details for free
The multi-currency account also gives you bank details for EU, US, UK and Australia, as if you own a local bank account in those countries.
Now you can receive EUR, USD, GBP and AUD from your friends in those countries for free, by just giving your TransferWise local bank account details to them. They can do a local transfer when they pay you, then do a currency conversion in the app, saving both of you money and fees in the process.
Compare this to local banks – which make use of the SWIFT network for inward telegraphic transfer of funds – a service or handling fee is usually charged for any fund transfer. For example, DBS charges a $10 handling commission for deposits to a current account.
Free ATM withdrawals
If you have ever tried withdrawing money from an overseas ATM using your credit card, chances are you’d be slapped with a ATM withdrawal fee of between $5-$10, depending on the country you’re in.
During my recent trip to Malaysia, I wanted to withdraw S$50 worth in Malaysian Ringgit because I didn’t bring enough money with me, but the ATM levied a $5 surcharge on my withdrawal, and I immediately lost 10% of my purchasing power in that very moment.
The TransferWise debit card also offers free ATM withdrawals at any ATM worldwide which accepts MasterCard (except Singapore – you cannot withdraw via ATMs in Singapore), up to $350 every rolling 30-days. If you need to withdraw more, then a 2% charge on withdrawals above the limit will be levied.
Please note that some ATMs also charge an ATM fee in addition to this which cannot be avoided, but you could of course find another ATM which doesn’t. For ATMs that give you the option of converting your money to local currency, saying no will give TransferWise the option to handle the currency conversion for you – you can read about DCC more here.
Spending notifications is a very useful feature for me to know when my TransferWise debit card is being used, especially if there is any unauthorised transactions made.
It also tells me how much in local currency terms I am paying for the overseas transaction, which helps me budget wisely for my trip – no more bill surprises because you know exactly how much you’re paying for.
Comparing TransferWise vs Cashback and Miles credit cards
A popular question would be how could using the TransferWise debit card stack up against cashback and miles credit cards for overseas spend.
Choosing to use your credit card overseas can be a conundrum because credit card companies tend to incentivise us to use these cards overseas with higher miles earning rates on foreign currency transactions. For instance, the Citi PremierMiles Visa, for example, earns 1.2 miles per dollar on local spend, but 2 miles per dollar on overseas spend.
However, while the higher earn rate is attractive, you must be mindful what you’d lose out on. According to MainlyMiles, the following fees are levied on foreign currency spends:
- the foreign exchange spread from first converting the currency to USD then to SGD – typically 0.8%
- the foreign exchange fee levied by your card issuer – typically 1.5-2.5%
- the foreign exchange fee applied by the card network (Visa, MasterCard or Amex) – typically 1.0%
The fees add up to around 2.8%-3.5% of your credit card spend!
Adding these explicit costs to your miles calculator to derive your cost per mile and you’d find that many cards are not exactly worth keeping track when you also need to meet the minimum monthly spend – especially if you’re like me who value simplicity when it comes to personal finance.
Furthermore, beware of using credit cards overseas as dynamic currency conversion fees may also be charged if you choose to pay in SGD instead of the local currency overseas. These additional costs of roughly 1-2% also prevent you from earning the higher miles earn rate because the spend will be charged as though it’s a local SGD transaction.
TransferWise fees and charges
TransferWise charges an average currency conversion fee of about 0.67% (sometimes it’s even lower at 0.44%) when making foreign exchange conversions, which makes it about 5 to 6X cheaper than what average banks are charging.
The fees are used to pay for offices and operational costs, customer support teams and growth – and they are radically transparent about it.
There are no monthly account fees, no fees for depositing and receiving money and no fees for adding extra bank details. SGD bank withdrawals outside of TransferWise are charged at a small fixed fee of S$1.40.
Turning the tides
TransferWise has changed the money transfers game completely. It’s interesting because they have found the solution to cheap international money transfers, just like how Skype found the way to cheap international phone calls.
By cutting out the middlemen and their exorbitant fees, giving consumers like us the power of choice, transparency and control, and offering useful features such as in-app card management, free ATM withdrawals and super competitive exchange rates, it’s obvious enough that you need to bring this card with you whenever you travel.
TransferWise wants to build the best way to move money around the world, making moving money instant, convenient, transparent and eventually free. While completely free foreign exchange is still a distant dream, TransferWise is the closest thing to it right now.
If you want to give them a try, you can sign up for a TransferWise debit card here.