How to cut your business' foreign wire transfer fee costs
Ask a question.
Dear Your Business Credit,
I do some work for companies in Europe at my marketing firm. Is there any way to avoid the wire transfer fees when they pay me? On my last project, my invoice was for $400 and I ended up receiving $390 once the fee was subtracted. -- Sandy
Those pesky wire transfer fees can add up over the course of the year if you do a lot of international work. I've been frustrated by them myself. The good news is that you can avoid some of these fees by planning ahead.
If you do a fair amount of overseas work, some clients will probably have policies in place in which they will pay you only by wire transfer. Choosing a bank that charges fees on the low end of the range for inbound foreign wire transfers (which average about $15 at larger banks) can save you a good amount of money over a year.
If you are a long-standing customer at your bank, ask if your banker can waive the fee for inbound wire transfers. While this isn't a standard practice, a couple of entrepreneurs have told me their banker agreed to waive wire transfer fees in appreciation of their business.
Another solution is to ask your clients to pay the wire transfer fees when you are negotiating a gig. In lieu of this, some business owners simply charge higher prices when working with overseas clients, baking the wire transfer fees into their prices.
Or, for customers who have shown a good payment track record, you may want to invoice less frequently to reduce the number of times you are charged wire transfer fees. For instance, instead of sending five $1,000 invoices, send one for $5,000 -- and pay one wire transfer fee instead of five.
You can also opt to accept credit cards, which will save you money in some cases. But in my own experience, large and midsize businesses generally don't pay smaller creative services vendors by credit card. It's more likely to be the very small clients that like this method.
In any case, for a small marketing firm that has only a few global clients who want to pay by credit card, I don't think it pays to set up a merchant account, because you will have to pay fees to maintain it. You may be better off setting up an account through Square or PayPal.
Before you offer this option, do the math on the transaction to make sure you will actually save money this way. PayPal charges a 2.9 percent international transaction fee plus a 1 percent cross-border fee and/or 2.5 percent currency conversion fee.
Let's look at your $400 job. The $10 you were charged was 2.5 percent of the $400. Using PayPal instead, you would pay up to 5.4 percent in fees, or $25.60. If you were at a bank that charges $30 for an inbound wire transfer, that rate would save you money, but given your bank's $10 fee, PayPal would actually cost you more.
There are some new solutions popping up. I came across a startup in the U.K. called TransferWise that says it charges 0.5 percent to receive more than £200 (about $325 at today's exchange rate) and a £1 flat fee ($1.63) for smaller payments. Based on my own experience, it may be hard to persuade a large corporate customer to try a new service such as this. If you are serving very small businesses overseas, they may be more flexible. It could be worth testing this service on a smaller job.
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Funding a a small business with a low credit score, no ITIN or EIN – If you're looking to fund a new business but don't have the credit or established history to get a loan, there are ways to do it without resorting to a high interest loan ...
- Some California businesses, but not all, are exempt from surcharge ban – Ruling by 9th Circuit Court early in 2018 exempts some, but not all, businesses from ban on credit and debit card surcharges ...
- How to get payment if a customer's credit card is declined – Your small business has options to recover the money that is owed ...