I love new financial technologies (FinTech) like online banking services because they allow us to save time & money, while avoiding all the hassle that comes with the traditional banking system.
In this article, I want to show you how to use TransferWise to receive money from abroad for free. I'll first show you why you shouldn't use your bank to receive foreign currencies, and then how to use TransferWise to easily receive foreign currencies.
Why You Should Avoid Your Bank to Receive Money From Abroad
When I started my journey as an online entrepreneur (I was doing freelancing), I often got paid by clients abroad (mainly in the US), so I was receiving US Dollars on my bank account in Euros. I really had no clue at the time that I was loosing so much money in banking fees. Usually, your bank will charge you two times when receiving money in a foreign currency.
The first fee is usually directly given by the bank, which is a fee that is simply for the fact of receiving money in a foreign currency. It's usually between 10 and 50 Euros.
Then, you have the conversion rate. I was very surprised to learn that my bank actually always gave their clients a very bad conversion rate, and that they were making money with the difference compared to the actual conversion rate. This second hidden fee is usually much bigger than the first one.
Note that multi-currency accounts don't really solve the issue: you still have to convert the money to your base currency, which doesn't solve the problem as you will get the second 'hidden' fee.
Let's have a look at a concrete example. I am using Euros as my primary currency, and let's say I have a US based client paying me $1,000 for a product or for a service I did for them. Using my traditional bank, where I have an account in Euros, it would cost me from the start a fixed fee of 20 Euros just to receive money in a foreign currency. But that's not all. If I received the payment today, they would also use an exchange rate of $1.24 per Euro, so I would get at the end 786.45 Euros. Let's keep this number in mind for the next section.
How to Receive Money Using TransferWise
Now let's first see what I could have saved using TransferWise, and then I'll show you step by step how to do it. Using the same example as before, I would give to my US client the number of my TransferWise US account (more on that in a minute). They would then pay me on this account (for free, as it's like a local US transfer for them). Of course, I can then use those Dollars to pay for things directly, so I got paid in that case completely for free in a foreign currency for me.
Then, I could simply use TransferWise to convert the money back to Euros if I wanted to. Also if I was to make the transfer today, it would cost me a fee of 2.98 Euros, and they would use a conversion rate of $1.178 per Euro, so I would get 852.59 Euros at the end. That's 66.14 Euros of difference that would have gone to my bank if I didn't use TransferWise!
Let's now see how you can easily do that with TransferWise. If that's not done yet, you will have to create a free account at TransferWise (shouldn't take more than 5 minutes). Inside your account, you will find something that is called Balances (previously called borderless accounts), where you can store money in many currencies:
For some of the currencies, like Euros, Dollars, and British Pounds, you will find the bank account details that you can share with people that need to pay you:
They will then be able to send money to this account, just like they would do a local bank transfer. It will be completely free for them and for you. Next, if you want to use, you can simply click on the 'Convert' button on the account where you received the money to convert what you received to the currency of your choice:
As we saw before, this is the only step where you will have to pay a small fee, which is much lower than the one at your bank. Also, TransferWise will always give you the best conversion rate of the moment.
Once that's done, you can then also choose to send the money back to your own bank account, which is also completely free:
With all of that, you can now get paid in a foreign currency, and use TransferWise to receive the money for free, and then transfer it back to your local bank account if you want, while making huge savings compared to your local bank.
Who Should Use That?
There are two main use cases for what we saw in this article. The first one is if you are a freelancer, and you are getting paid from clients in foreign currencies.
The second case, which is the one I mostly use those days, is if you are an online entrepreneur and need to get paid from an online platform or service in a foreign currency. For example, a good chunk of my income comes from the Amazon Affiliate Program, which only pays in US Dollars to a US bank account. Which means that before, I had to receive a check (!) from them, and then I had to deposit it on my Euros account, with huge fees in the process. Now, I simply get paid for free on my TransferWise US balance account.
To conclude, I really recommend using TransferWise. Not only it makes it really easy to receive money from abroad in a foreign currency, but also it comes with a very nice interface, a nice mobile application, a free debit card, easy transfers, and much more. I actually now completely use it as my primary bank, and only keep my 'traditional' bank account for legal purposes. I am also sure that TransferWise will evolve even more in the coming years, with more currencies for example, making receiving & converting currencies even easier.