How to Minimize "Adverse Exchange Rate" When Sending Money via Wire Transfer from US to Foreign Banks

[bluegill_04]

What I mean by the "adverse exchange rate" is the lower (or higher) exchange rate that is really a fee for the transaction, even though the bank claims not to have charged any service fee. I am a US expatriate in South Korea who last transferred funds from Bank of America to a local bank (Hana Bank in South Korea). Here are the details:

• Amount of USD Transfer from Bank of America: $13,070.76
• Amount Received by Local Bank: 15,000,000 in Korean Won
• Market Exchange Rate on Date of Transaction: KRW 1,196.86 per USD (3 day average)
• Exchange Rate Applied by the Bank for the Transaction: KRW 1,147.60 per USD on 2022.0209
• Amount of Loss Due to Below Market Translation: $537.97 or 4.12% of the transaction amount: $13,070.76 * [1,196.9 (Market Rate) - Bank Rate (1,147.6)] = KRW -643,877; KRW 643,877 / market translation rate = 643,877 / 1,196.9 = -$538 in translation loss.

I need to make another transfer soon. When talking to another expatriate, I was told I should transfer the amount in USD and then let the local bank do the transfer, which could be cheaper, since US commercial banks will apply the "adverse rate" when the translation is done on US shores. Is this true: I may have heard the opposite actually from another foreigner?

Obviously I am kicking myself not doing wire transfer when the USD was really strong 4 months ago (KRW 1,450 per 1 USD). But still trying to minimize adverse exchange rates that act as hidden transaction fees. The goal is to keep the rate as close to the market rate as possible. Any suggestions?

Edit: loss calculation added above to show how it was computed.

 

[lucyt25]

@bluegill_04 Transferwise (called just Wise now I believe) gives a better deal than banks. I've also heard Interactive Brokers has a good exchange rate and can be used to transfer, but I use that as an investment account mainly and haven't tried transferring.

 

[angusargyle12]

@lucyt25 Interactive Brokers claims they don’t support opening a position in Korean Won.

https://ibkr.info/node/709

Apparently, Korea had a lot of capital controls that make things tricky.

 

[shannw7]

@lucyt25 Wise doesn't allow sending to Won. If you send dollar to dollar (if it's even allowed), it will use SWIFT. It might also be possible to send another currency. But it's possible the same loss will occur as when sending from the bank. (Aside from the exchange rate, there can also be charges from intermediary banks.)

 

[bluegill_04]

@shannw7 Wise does seem to allow sending to Korean Won. I just simulated a transaction and their charges seem much lower and they use the real time FX rate. Just 1% charge when Banks take 4-5% off your transaction by using a lower FX rate.

 

[mihailolt]

@bluegill_04 Always tell Bank of America you are transferring to a US dollar denominated account. That way they will not do the currency conversion, and the receiving bank will instead. Banks outside the USA are almost always less predatory with their exchange rates.

 

[resjudicata]

@bluegill_04 yeah bro i feel that pain. just walked out of a skank of america b/c they were taking $.05 on every euro i was converting. well, trying to convert today. €14,000 cheque, not about to hand them fools $700 of my money