Why banks charge a higher transfer fee for International Transfers | 2025 guide

I’ve never paid a fee to transfer even large amounts of money between banks. (Source Reddit)

Transferring money from the US to India can be challenging for Indian Americans, primarily due to the high fees associated with bank transfers. Many find it frustrating that a significant portion of their hard-earned money is taken as service charges, along with various hidden fees. As a result, the recipient in India often receives less than expected.

 Bank transfers can turn into quite a stressful experience for Indians or foreigners living in America, because they don’t know how to transfer money without hidden fees, and is there any method to transfer money for zero ( free of cost)?

In this guide, we will explain the reasons behind these transfer costs, how to avoid excessive fees, the applicable charges, the factors that influence the bank transfer fees, and tips to minimize extra expenses to save money.

Two types of bank transfers. Explained

It might surprise you, but there are two types of money transfers, and to surprise you more, one of them charges nothing for the transfer, but the other is quite costly. Let’s dig deeper: 

EFT Transfers

Electronic Funds Transfers (EFTs) move money through the U.S. ACH system, which connects banks to each other. These transfers usually run in batches overnight, so the process is automated and costs little to nothing. You can use EFTs to move money within the same bank (like from checking to savings) or between different banks (like from Chase to Citi).

Apps like Zelle, PayPal, and Venmo also rely on this system. They feel fast and simple because your bank often gives you access to the money right away — even though the actual transfer settles later.

That’s why EFT is cheaper, or you can say charge zero fees, because it takes time to transfer money, although it shows the amount immediately in your account, but still the real process takes 1 to 3 business days 

Wire transfer 

Wire transfers are sent through systems like Fedwire (for U.S. transfers) or SWIFT (for international transfers), using unique codes to route the money correctly. These transactions are monitored more closely by regulators and come with a guarantee to the banks that the funds are available.

Because wires move quickly — often within the same day — and provide immediate confirmation of funds, they come with higher costs. Banks must pay to be part of these networks, and there are also regulatory and transaction fees attached. 

Even though they are costly but the transfer is fast, secure, and more reliable than any other method. 

Also read: best ways to transfer money from usa to India in 2025 

What are the applicable charges for a wire transfer?

When sending money abroad, several types of fees can apply.Below is a comprehensive breakdown of the most common ones :

1. Currency Conversion Markup

Instead of openly listing a separate currency conversion fee, many banks build their profit into the exchange rate itself. They usually offer 2 to 5 % which is often less favorable than the real market rate. This is why you may sometimes see banks advertising “no international wire fee,” when in reality they are earning from the exchange rate difference.

2. Sending Bank Fee

The bank you initiate the transfer from will typically charge a service fee. This covers their processing and administrative costs and may be either a flat rate or a percentage of the transfer amount. The actual fee depends on your bank, the method used, and the country you’re sending money to.

3. Intermediary Bank Fee

The transfer may be done through a correspondent bank if you and your recipient banks don’t have a direct partnership. This middle bank handles the transaction on behalf of both sides and usually charges around $15–$30 (₹1,300–₹2,600) for the service.

4. GST (Goods and Services Tax)

For transfers from India, GST is applied based on the transfer amount.

• Up to ₹1 lakh: ₹45–₹180
  
• Between ₹1 lakh and ₹10 lakh: ₹180–₹990
  
• Above ₹10 lakh: ₹990–₹60,000
  

5. TCS (Tax Collected at Source)

International remittances are also subject to TCS. The amount paid here can later be adjusted against your income tax liability. If your final ITR shows no tax due, the entire TCS amount is refunded by the government.

Why Are Bank Fees for Wire Transfers So Expensive?

When you send money abroad from India under the Liberalised Remittance Scheme (LRS), banks have to follow strict procedures and handle a lot of paperwork. To simplify things and avoid confusion, banks set a fixed exchange rate for the day, known as the “card rate.” This rate is decided by the bank’s Treasury before 10 AM and stays valid until 4 PM.

Since exchange rates change throughout the day, fixing a rate protects banks from disputes. For example, if rates drop by noon, a sender might demand the lower rate, leading to losses for the bank. By sticking to a fixed “card rate,” banks ensure predictability and safeguard their margins.

However, this convenience comes at a cost. The card rate includes a built-in markup — usually 2% to 5% higher than the interbank or mid-market rate (the real rate you see on Google). The interbank rate is simply the midpoint between buy and sell prices in the currency market — not the rate consumers actually get.

This markup allows banks to earn revenue while also protecting themselves against sudden market swings. On top of that, banks add transfer fees to cover administrative expenses, operational risks, and compliance with regulations.

In short, the combination of fixed exchange rates, hidden markups, and additional service charges is what makes wire transfers through banks more costly than they may initially appear.

Bank Transfers vs. Online Money Transfer Services

Aspect	Banks (Wire Transfer)	Fintech/Online Transfer Services (Wise, Remitly, etc.)
Exchange Rate	Card rate (2–5% markup)	Mid-market rate (real exchange rate)
Transfer Fee	₹500–₹2,000+ per transfer	Low fixed fee (often under ₹500)
Speed	Same day to 2–3 business days	Instant to 1–2 business days
Transparency	Hidden charges in the exchange rate	Transparent fees and real-time exchange rate shown
Best for	Large, urgent transfers with guaranteed settlement	Everyday remittances, cost-saving, and smaller transfers

8 Factors That Impact the Cost of the International Wire Transfer Fee 

1. Destination Country

The country you’re sending money to plays a big role in how much you’ll pay. Transfers to popular destinations like the U.S., U.K., or Europe usually cost less because the systems are well-connected. On the other hand, transfers to less common or high-risk countries can be more expensive due to limited banking networks, extra compliance checks, and higher operating risks.

2. Currency Exchange Rates

If you’re transferring money in a currency different from your account’s, your bank or transfer service will apply a currency conversion markup. This is often 2–5% above the mid-market rate (the rate you see on Google). The rarer the currency, the higher the markup tends to be.

3. Transfer Amount

Some banks apply a fixed fee for every transfer, while others calculate charges as a percentage of the amount sent. Flat fees can feel costly for small transactions, but percentage-based fees become more expensive as the transfer amount increases. In the case of very large transfers, banks may be open to negotiating or lowering the charges to make the transaction more attractive for the customer.

4. Intermediary or Correspondent Banks

Not all banks are directly connected worldwide. When money travels from one bank to another without a direct relationship, an intermediary bank steps in to complete the transfer. These middlemen charge their own fees — usually $15–$30 — which increases the total cost for the sender or receiver.

5. Speed of Transfer

The faster you want the transfer to go through, the more you may have to pay. Standard wire transfers can take 2–3 business days, but express or same-day transfers often come with higher charges.

6. Banking Networks and Partnerships

If the sender’s and receiver’s banks are part of the same international network or partnership, fees may be lower. Without such a link, the transaction might require multiple steps, increasing costs.

7. Regulatory and Compliance Costs

International money transfers must comply with strict regulations such as AML (Anti-Money Laundering) and KYC (Know Your Customer) checks. These legal requirements add to banks’ operational expenses, which are then passed down as part of the transfer fee.

8. Receiving Bank Charges

Sometimes, the recipient’s bank also applies its own fee for crediting the funds to the account. While this cost may not be visible upfront, it reduces the final amount the receiver gets.

Sum up 

Bank transfers, especially international wire transfers, are often expensive because they involve more than just moving money from one account to another. Banks add currency markups, transfer fees, compliance costs, and intermediary charges to ensure speed, security, and reliability. While this makes wire transfers a trusted option for urgent or high-value transactions, it also means that senders and recipients often end up paying more than expected.

For everyday remittances or smaller transfers, fintech platforms and online money transfer services can be a smarter choice. They usually offer the mid-market exchange rate, transparent pricing, and lower fees, helping you save money without compromising on convenience.

At the end of the day, the key is to compare your options before sending money abroad, and for comparison, use the Vaultrate compare rates tool. By understanding how bank fees work and exploring alternatives, you can keep more of your hard-earned money in your pocket — and ensure your loved ones or business partners receive the amount they truly need.

About vaultrate 

Vaultrate is an independent currency conversion platform, with the mission to provide real-time up to date exchange rates to our visitors and provide them a comparison between different online money transfer services, so they can choose the best fit for their needs.