According to the World Bank, remittances from the US to India reached a record high of $125 billion in 2023, reaffirming India's position as the world's top recipient of remittances. However, many people in India often find themselves receiving less money than expected due to hidden charges such as SWIFT fees and currency conversion charges.

What's even more concerning is that most people are unaware of these hidden charges. They often find themselves blindsided by expenses such as exchange premiums or administrative fees that they were not made aware of.

In this blog, we will explore hidden charges, how to identify them, and how to receive the most money you deserve when you send money from the US to India.

What are Hidden Charges?

Hidden charges refer to additional costs or fees that are not disclosed upfront or are not easily noticeable.

These fees may be deducted from a payment or transaction, reducing the amount received by the recipient, often without clear understanding and prior notice. 

What are the Common Hidden Costs to Identify when Sending Money from the US to India?

1. Transaction Fees:

Transaction fees can be categorized into direct and indirect costs when making cross-border payments. 

Direct charges are upfront fees imposed by banks or payment service providers for processing transactions. Indirect charges, on the other hand, include less visible costs like unfavourable exchange rates, which can significantly impact the final amount received.

2. Exchange Rate Margins: 

Exchange rate margins refer to the difference between the rate offered to you and the real mid-market rate. Banks and payment providers often add a margin to the exchange rate to generate additional profit. 

3. Intermediary and Receiving Bank Fees:

Cross-border payments typically involve intermediary banks that facilitate transactions between the sender and receiver banks. These intermediaries charge fees based on the complexity and number of banks involved. 

Additionally, the receiving bank may impose fees to process incoming international payments. These fees can significantly reduce the amount received at the end of the transaction.

How Do Different Money Transfer Services Cost When Transferring from the US to India, and How Much Do You Receive?

The cost of transfer is calculated when you send $2,000 from the US to India. 

Exchange rates are kept at 83.5185

How to Minimize Hidden Costs When Sending Money From the US to India?

• Negotiate Better Rates with Banks: Don't hesitate to negotiate with your bank for better terms on cross-border payments. Build strong relationships with banks so that you can leverage them to reduce fees and favourable exchange rates.
• Consolidate Your Payments: Consolidate your multiple international transactions into fewer ones, as larger payments can help lower overall costs. Fewer transactions mean fewer fees and better exchange rates. This is specifically beneficial if you regularly make smaller cross-border payments. 
• Utilise Specialised Payment Providers: Consider using specialised payment providers or fintech companies that offer competitive rates and lower fees for international transactions. They often have more transparent fee structures and may offer better exchange rates than traditional banks. 
• Observe Exchange Rate Margins: When converting currencies, be vigilant about exchange rate margins. Banks and payment providers often add a margin to the real mid-market rate, which can reduce the final amount.
• Stay Informed About Regulatory Changes: Cross-border payment regulations can change frequently. Keep abreast of these updates and understand compliance requirements to avoid unexpected costs and penalties. 

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In Conclusion

When making an international money transfer from the US to India, you might encounter hidden charges, such as transaction fees, exchange rate margins, intermediary fees, etc.

It is important for both sender and receiver to understand these hidden fees in order to receive the intended amount.

By using money transfer services, negotiating with banks for better terms, and staying updated on regulatory changes, you can avoid getting hit by hidden charges. 

FAQs

Q1. How can I identify and avoid hidden fees when choosing a money transfer service?

Hidden fees are not disclosed upfront or are not easily noticeable. It can be in the form of transfer fees or exchange rate margins. To avoid hidden fees, avoid multiple transfers, compare different money transfer services and negotiate with your service provider.

Q2. What is the impact of exchange rates on hidden charges for international money transfers?

Some money transfer services offer lower exchange rates than those prevailing and add a margin to generate additional profit. This means less money is in the hands of the recipient.

Q3. Are there any specific types of money transfer services that are more likely to have hidden charges?

Some money transfer services, such as Western Union and MoneyGram, typically apply flat fees based on transfer speed, destination, and transfer amount. For international transfers, additional charges include exchange rates. These services may not offer competitive exchange rates, which can result in hidden costs when transferring money internationally. However, they are known for their reliability and convenience.

Q4. How do transfer limits and minimum amounts affect hidden charges?

Transfer limits and minimum amounts can impact hidden charges by influencing the fees applied based on transaction size. Smaller transfers often incur higher fees when compared to larger transactions.

Q5. Are there any regulatory guidelines that help protect against hidden charges in money transfers?

Yes, regulatory guidelines such as the Consumer Financial Protection Bureau's (CFPB) rules under the Consumer Financial Protection Act (CFPA) help protect consumers against hidden charges in money transfers. According to the CFPA, remittance transfer providers are prohibited from engaging in deceptive acts or practices, which include misleading consumers about fees associated with remittance transfers.