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Did you know? In 2024, the transaction value in Canada's digital remittance market was about $1.98 billion and is expected to reach $2.15 billion by 2028. This shows how important it is to understand the costs associated with sending money.
One big factor that can affect the amount your family in India receives is the currency conversion fee. These fees can add up and reduce the total amount sent.
In this blog, we’ll look at how currency conversion fees impact remittances from Canada to India. We’ll explain how these fees are calculated, how to avoid them, and compare different remittance services.
What Are Currency Conversion Fees, and Why Are They Charged for Remittances?
Currency conversion fees are charges imposed by financial institutions or remittance service providers for converting one currency into another. These fees cover the cost of facilitating the exchange and can vary widely depending on the service provider.
For example - If you use a service like Western Union to send $1,000 CAD to India, the service might charge a 2% conversion fee. This means an additional $20 CAD would be deducted from your remittance, reducing the amount your family receives.
Conversion fees can add up quickly, especially for frequent remittances, making it crucial to understand how these fees work and how they affect your remittances.
Trends in Currency Conversion
Recently, the trends in currency conversion have shifted significantly, particularly in the remittance sector. Here's an overview of the exchange rates affecting remittances from Canada to India:
The above chart trend shows that the CAD to INR exchange rates experienced significant fluctuations. These variations highlight the importance of timing when sending remittances.
On some days, the rates peaked, offering better value for money, while on others, they dipped, reducing the amount received by recipients. This volatility underscores the need for regular monitoring of exchange rates.
By staying informed and choosing the optimal times to transfer, you can maximise the benefits of your remittances and minimise the impact of currency conversion fees.
How Do Conversion Fees Affect Remittances from Canada to India?
Currency conversion fees can have a big impact on how much money your family receives in India. When you send money, the remittance service provider usually converts your Canadian dollars (CAD) to Indian rupees (INR).
The exchange rate used for this conversion is frequently marked up from the mid-market rate, which is the rate at which banks trade currencies with one another. This markup, together with extra fees, lowers the total amount received by the recipient.
The mid-market rate is relevant here because it serves as the benchmark for the most accurate and fair exchange rate available.
Mid-Market Rate: The mid-market rate is the midpoint between the buy and sell rates of two currencies. It is considered the most accurate exchange rate and is often used as a benchmark for currency conversion.
For example, if the mid-market rate is 1 CAD = 70 INR, but your bank or service provider offers 1 CAD = 68 INR, you lose 2 INR for every dollar sent. On top of this, a flat fee might be charged per transaction, further decreasing the total remittance. These conversion fees can add up quickly, especially for frequent or large transfers.
What's the Cost of Converting Currency for Canada-to-India Remittances?
The cost of converting currencies while sending remittances from Canada to India varies greatly. Banks and traditional remittance services typically charge greater fees and provide worse exchange rates than online transfer providers. The entire cost usually includes:
Exchange rate markup: This is the difference between the mid-market rate and the rate supplied by the remittance service.
Flat Fees: Additional charges per transaction, which can be a set amount or a percentage of the transfer value.
For example, banks may charge a fixed cost of CAD 10-30 for each transaction, plus an exchange rate markup.
Do Fees Vary Among Different Remittance Services?
Yes, fees vary widely among different remittance services. Here are some key differences:
Banks: Generally, banks charge higher fees and offer less favourable exchange rates. They might also have additional charges for international wire transfers, making them one of the costliest options.
Online Transfer Services: Companies like Wise, OFX, Vance and Remitly often provide better exchange rates and lower fees. They use transparent pricing models, allowing you to see the total cost upfront.
Offline partners - Companies like Western Union and MoneyGram offer competitive rates but fees can vary based on the transfer method (e.g., cash pickup vs. bank transfer). While they offer the convenience of physical locations, they may have higher fees compared to online services.
To find the best deal, compare the total cost of the transaction, including both the exchange rate and any additional fees.
How Can I Reduce Currency Conversion Costs?
Reducing currency conversion costs can ensure more of your money reaches your family in India. Here are some strategies:
Compare Providers: Always look at the costs and currency rates of various remittance providers. Use comparison websites or tools to choose the best cost-effective solution.
Choose online services: Online transfer services such as Wise, Vance, OFX, and Remitly often provide better rates and lower fees than banks and traditional remittance providers.
Send large amounts less frequently: If feasible, combine tiny transfers into bigger ones. This can mitigate the effects of flat fees, which are frequently charged in every transaction.
Avoid using Credit Cards: Using a credit card to fund your transfer may result in additional fees. Choose direct bank transfers or debit card payments instead.
Look for deals: Some remittance providers provide specials or discounts to first-time users or during specific seasons. Take advantage of these discounts.
Rate Alerts on Vance App
Never miss out on the right exchange rate again! Vance's latest app update includes Rate Alerts. Simply set your preferred rate, and Vance will inform you when it is reached.
This guarantees that you make the most of your money transfers, whether you're sending funds home, paying overseas bills, or managing assets. With Vance, you can send money to India securely and at rates that you see on Google without having to pay any additional hidden fees.
Maximise your savings by downloading the Vance app today!
In Conclusion
Currency conversion fees can significantly impact the amount of money received by your family in India. These hidden charges can add up, diminishing the total amount your loved ones receive.
By understanding these fees and comparing different remittance services, you can identify the true cost of each transaction and avoid unfavourable exchange rates.
Making informed decisions about remittance providers can potentially save you a considerable amount on your transfers, ensuring better financial support for your family.
FAQs
Q1. How do currency conversion fees impact the exchange rate for remittances from Canada to India?
Currency conversion fees reduce the effective exchange rate, resulting in less money received by the recipient.
Q2. What are currency conversion fees, and why are they charged for remittances?
Currency conversion fees cover the cost of converting one currency to another and are charged by banks and remittance services.
Q3. How can one compare currency conversion fees among different remittance services in Canada?
Compare the total cost, including the exchange rate offered and any additional fees, to determine the most cost-effective service.
Q4. What is the average currency conversion fee for sending money from Canada to India?
The average fee varies, but it typically ranges from 1-3% of the total transaction amount.
Q5. How do currency conversion fees vary between banks and other remittance service providers in Canada?
Banks generally have higher fees and less favourable exchange rates compared to online transfer services and specialised remittance providers.
Q6. How can I reduce currency conversion costs?
Use online transfer services known for their competitive rates and low fees, and always compare different providers before making a transfer.
Rupali enjoys writing about everything related to money (in India and around the world). A MICA graduate in Communications, she has over seven years of experience in content creation and communication strategy for various user touchpoints, from CRM to UX for apps and websites, especially in fintech and healthcare. Outside of work, you'll find her binging on true crime documentaries or cooking up a storm.
