If you’ve followed me on Twitter or Facebook for a while, or have read a few of my blog posts, you might be aware that I am a big fan of TransferWise for international transfers and payments. TransferWise keeps foreign exchange fees extremely low and gives customers a better exchange rate than most banks by passing on the actual daily exchange rate rather than incorporating an exchange margin. With most banks in Australia, this margin is around 3%. On a $100 purchase, that’s a $3 saving just on the exchange rate. Many banks also charge a fee on foreign exchanges and foreign purchases. TransferWise fees are typically much lower.
If you receive money in foreign currencies, TransferWise can save you even more money by facilitating storage of the foreign currency and spending it without transferring it back to your base currency first.
So, for example, my base currency is AUD. However, I receive commission payments from some of my affiliate partners in USD. They get deposited directly into my bank account. I also pay Kinsta in USD for my website hosting.
Before TransferWise, those commission payments would go into my bank account and my bank would deduct a fee to convert that into AUD. I’d then pay Kinsta by credit card and my bank would charge me a fee to convert my AUD into USD.
If only I didn’t have to convert that USD back to AUD first! With TransferWise, this is completely possible.
Set up your multi-currency accounts in TransferWise
Ok, so you have opened up a TransferWise account. You’ll have a base balance automatically setup in your chosen base currency. For me, that’s AUD.
When you log into your account, you’ll see the activity screen by default. From here, you can see all the transaction activity, much like in your regular online banking. Your balances will be shown at the top. On mine, you can see I currently have a GBP balance setup in addition to my AUD balance.
Straight away, I can start loading my base currency by transferring money from my bank to the TransferWise bank account details provided, or by clicking the “Add AUD” button (or whatever currency your base currency is).
Now, if you aren’t receiving money in foreign currencies, you are good to skip down to the “Get a TransferWise debit card” section. For me though, I want to receive money in USD and hold it in a USD account until I am ready to use it.
To do that, I need to setup a USD balance. This is the same process I previously went through to add the GBP balance to my account that you can see in the screenshot above.
Open a foreign currency balance
Click the “Balances” link in the menu to go to the balances screen. This screen will show you a list of the balances you currently have, how much is in each one, and how to add funds to it.
This process and concept are pretty similar to travel money cards like Qantas Travel Money and the Australia Post Travel Mastercard, however, unlike those cards, TransferWise is cheaper to use and can provide you with bank details for most major currencies. Have bank details enables you to use each balance more like an actual bank account for receiving funds in foreign currencies.
To open a new balance in TransferWise, click the “Open a balance” button at the top of the balances screen.
You will be taken to the open a balance screen and given the option to select what currency you would like a new balance in.
You can choose from more than 40 currencies, far surpassing travel money cards that are typically around 10-15 currencies. However, if you want bank details, you must choose from one of the currencies that support local bank details. Right now, these are AUD, USD, GBP, Euro, and PLN (Polish zloty).
I’ve selected USD for my new balance. Click the “Open your USB balance” button to proceed with the setup.
TransferWise will now set up your new balance and let you know when it is ready.
Even though USD supports local bank details, they aren’t created automatically. You have to request them if you need them. So to proceed, click the big blue “Got it” button and head onwards.
Getting local bank details in your foreign currency
You will be taken back to the balances screen where your new balance is now visible. Click on the balance to expand it.
You will be shown options for adding funds to the balance as well as a button to “get bank details”.
If you don’t need bank details, you can add funds by clicking the “Add USD” button and following the instructions. TransferWise will provide you with instructions to load money. We’re going to click the “Get bank details” button though.
The balance will reload with your new foreign currency bank details as well as any information about limitations that may apply to how you can use bank details for this currency.
Right now, USD accounts have limits on how much money can be deposited from other USD accounts (limits don’t apply if you are converting funds from another currency) and USD bank details can’t currently be setup with direct debits yet (so you can’t hook it up to PayPal and have PayPal debit your USD balance for USD transactions).
Note: some foreign currencies do support direct debits, Euro and AUD for example.
This is great, just what I want! Now I can have my USD commissions paid straight into my USD balance using these bank details. No need for converting to AUD unless I want to.
But, how do I now use this to pay for my website hosting and other USD transactions when direct debits are not supported?
Well, that’s where the TransferWise debit card comes in.
Get a TransferWise debit card
TransferWise does prompt you to order a debit card when you first set up your account. So chances are, you might already have one. However, if you didn’t order one during account setup, you can do so by clicking the “Debit Card” link in the menu of your account.
Please note that from May 6, 2020, a one-time fee is being introduced to get a debit card in the EU and UK. The one-time fee is being introduced for other countries from May 20, 2020, so I would recommend signing up and getting a card ASAP.
You will be taken to the debit card screen. If you already have a debit card (or have one on order), it will show you the details. It should look something like this if you have a debit card. If it hasn’t arrived yet the status will not be active, instead, it will show you the current status.
If you don’t have a card already or on the way, there will be a button on this screen to order a card. Click it and follow the instructions.
Once your card arrives in the mail, it will have instructions with it on how to activate it. Do this, and then you are good to move on to the next step, spending your foreign currency!
Spending foreign currency without conversion fees
The type of debit card you receive may vary depending on what your base currency is, and depending on the current relationship that TransferWise has with card issuers. Right now, in Australia, the debit card is a Mastercard debit.
It’s also neon green, so it really stands out.
You can use your TransferWise debit card to make purchases anywhere that accepts Mastercard payments. In Australia, this means you can use it at any EFTPOS terminal, online, through PayPal, with pay later services like ZipPay and AfterPay, and also to withdraw cash from ATM’s. It also means you can use it overseas anywhere that accepts Mastercard, including most online stores.
To use the card for online purchases, you have a choice, either pay by card directly or pay through PayPal. Here’s how both those scenario’s work
Paying in a foreign currency with my TransferWise card
Simply use your TransferWise card at the checkout like you would any other credit or debit card. Enter the card details and away you go.
Here’s what happens when you place an order. Let’s say I’m paying $100 in USD.
TransferWise will check my USD balance first. If I have $100 in that balance, then it will be used to pay for the purchase.
If I don’t have any USD, TransferWise checks my other balances and calculates what combination of other currencies will provide the best value conversion rate with the lowest fees. It might be that I have enough GBP to cover the purchase and that gets a better value conversion than AUD. In this case, TransferWise will convert enough GBP into USD to cover the purchase.
If I have $80 in my USD balance, TransferWise will use that, and then it will check my other balances to work out the best value conversion for the remaining $20. That $20 will then be converted from one of my other balances that gets the best rate and lowest fee.
So in my example where I have to pay for my website hosting in USD, I log into my Kinsta account and add my TransferWise card as my preferred billing method. Now, Kinsta will bill my TransferWise card and automatically use my USD commissions first before moving to my other currencies. Now I don’t have to pay conversion fees and lose money in foreign exchange rates going backwards and forwards between USD -> AUD -> USD. AWESOME!!!
Paying in a foreign currency with my TransferWise card connected to my PayPal account
PayPal is another common way of managing international payments, and yes, you can receive USD directly into your PayPal account as well. PayPal fees for conversion between your balances are excessively higher than TransferWise though, so it isn’t a good solution for managing your international currencies.
Link your TransferWise debit card to your PayPal account
To set this up, log into your PayPal account and click the “Money” tab.
From the money screen, scroll down to the “Cards” section and click on the “Link a new card” button. If you already have some cards linked to your account then they will show up here as well.
On the screen that appears, enter your TransferWise debit card details, as you would with any other debit or credit card.
Click the “Link Card” button and assuming you entered your card details correctly, you should see a success screen.
Now, click “Done” and you will be taken back to the Money screen. Your TransferWise debit card should now be listed in the cards section.
You can click “Confirm your card” to go through the process of verifying the card with PayPal, but it is not essential to get things up and running.
Now that your card is linked, you can begin using it.
Paying with your TransferWise card without PayPal currency conversion
When you make a purchase in a foreign currency, PayPal always defaults to doing the currency conversion for you. Why? Well, they would tell you it’s for your convenience so you know exactly what you are going to pay. The caveat is that this often isn’t exactly what you are going to pay because banks often add a foreign transaction fee if the merchant is overseas, even if you pay in your local currency. This is especially true here in Australia.
The real reason PayPal defaults to doing the currency conversion is because they charge excessively high conversion fees, so they make a lot from you when you choose to use their conversion service. To avoid these fees and make sure you are using your foreign balance on your TransferWise card, always choose to pay in the billing currency without PayPal currency conversion. Here’s how.
Proceed to pay as you normally would. After logging into your PayPal account to process payment, select your TransferWise card.
Click “Continue” and PayPal will show you what is going to be charged to your card in what currency. This is where it typically defaults to your local currency. As you can see below, PayPal would like to convert this USD purchase to AUD for me. I don’t want that though.
To change this, click “View currency conversion options”.
Select the original currency (in this case, USD) from the currency conversion options screen.
PayPal will update to show you the new amount in the original currency and confirm that your card provider (TransferWise) will determine the conversion rate and any fees.
Click “Pay in USD” (or whatever currency it is that you have selected).
You will be taken back to the PayPal payments screen where you can finalise payment. Just double check to make sure that it does show that you are paying in the currency you are expecting. I’ve had occasional issues with this.
That’s it. Click “Continue” and proceed to complete the transaction as normal. Your TransferWise card will be used to make the payment and funds will be taken from the appropriate balance, or converted from one of your other balances if you don’t have enough in that currency.
Sit back and enjoy the savings!
One caveat to note regarding PayPal and your TransferWise card. PayPal does not let you select the currency for billing agreements. Instead, PayPal kindly does the conversion to your base currency for you. You don’t get a choice.
I would recommend using your TransferWise debit card directly with merchants whom you have ongoing payments arrangements with to ensure you are getting the savings and not potentially doubling up on your exchange fees.
It’s so frustrating to have a USD balance, expect a payment to come out in USD, but instead, PayPal converts it to AUD for you, which means you are billed in AUD and thus TransferWise has to convert your USD to AUD. Subsequently, you are paying double exchange fees and it costs you way too much.
On a side note, it is possible to add your TransferWise USD account to your PayPal account to withdraw USD funds from PayPal, however, as of November 2020, PayPal charges a 3% fee to withdraw USD from Australian PayPal accounts to USD bank accounts. Ouch. The current list of PayPal fees for Australian accounts is here.
Got more tips on saving money with TransferWise? Let me know in the comments below!
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