Money Transfer: Cold Hard Cash

In the past five years of living in the United States and — until recently — still running a business in Germany, there have been a few occasions in which I needed to transfer money from Germany to the US the same day. And normally, this post should end right here.

Really, there shouldn’t be a problem to get, say $800 from one place to the other. After all it’s 2017, which means PayPal has been active in both countries for some 13 years. Let’s take a look. A few clicks lead us to the German PayPal terms and conditions that feature a simple table of fees for transferring money to other countries. There’s a fee of 1.00% for all transfers to the US, as long as the money comes out of your positive PayPal balance or directly from a linked bank account. All I have to do is log in to my German PayPal account, enter my US PayPal e-mail address as the recipient and select the amount. They even display their current exchange rate between Euro and US Dollar, which happens to be:

1 EUR = 1.0302 USD

Now, if that seems like a pretty low exchange rate, it’s because it is. The ECB has the reference exchange rate for the same day at:

1 EUR = 1.0630 USD

That’s another 3.2% that PayPal conveniently forgets to mention, bringing the total cost of that $800 transfer to $33.71 (applying the actual exchange rate).

In the past five years, I have looked into quite a few alternatives: Square Cash (instant, but not available outside the US), regular bank wire transfers (near reference exchange rate, but not instant and about $25 in fees), Transferwise (great service, near reference exchange rate, low fees, but not instant) and several others.

What’s my solution, then? It’s cold hard cash. Whenever I need to move money from Germany to the US the same day, I end up driving to the ATM, drawing the money using my German debit card — most US ATMs accept Maestro cards — and then deposit it into my US account, using that same ATM.

Here’s a breakdown of the cost:

$800.00 withdrawal/deposit
$3.00 ATM fee from Bank of America
€7.59 (international) ATM fee from my German bank
0.5% on top of the exchange rate

That brings the cost for the whole transaction to $15.07 (plus time and gas to get there). To compare, if I had had the time, Transferwise would have charged under $4 in fees. It may be 2017 and there might be fintech startups all over the place, but clearly there’s still a lot to do.

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