How to minimize charges on foreign currency payments

For a freelance content writing gig that Bengaluru-based Udita Pal did a few years ago, she received $88 of the $100 total payment due. No, she was not cheated. She lost 12% on currency conversion and cross-border payment charges charged by the online money transfer company she used.

Keyur Kumbhare, 22, has a similar story to tell. He lost nearly 8% on every payment he received through the platform, which is widely used by international payment companies. “I started convincing my customers to sign up for the cross-currency money transfer service that I thought was the cheapest,” said Kumbhare from Ahmedabad, who now runs a marketing agency.

Kumbhare refers to Wise (formerly TransferWise). Wise became a preferred choice for Kumbhare after trying several options. “PayPal was the first platform I used as it was the most popular but also expensive. Although the direct bank-to-bank transfer was cost-effective, it took 10 to 12 days for the payment to clear,” he said.

Money transfer technology companies such as Wise, Payoneer, PayPal, Winvesta and Salt (an Indian startup) have enabled freelancers to receive money from abroad faster compared to traditional banks. In some cases, bank transfers can work better in terms of cost and security because they don’t involve intermediaries (see table).

Bank Transfers: The SWIFT (Society of Worldwide Interbank Financial Telecommunicationwire) transfer mechanism followed by banks is the fastest bank-to-bank transfer option one can choose. There are usually three costs associated with this – the sending bank’s commission, the receiving bank’s commission and the forex mark-up fee.

The sending bank’s commission is usually borne by the customer making the payment, but the customer can choose to pass on the full cost or share it with the freelancer. Make sure this doesn’t happen as banks in countries like the US charge a hefty $40-$50 fee.

As for receiving bank commission, most of the major Indian banks, such as HDFC, ICICI and SBI, have done away with it over the years and only charge a forex mark-up fee. Some banks like Axis and Induslnd charge a fee of 100-500 per transaction for wire transfers. GST is charged by banks on all incoming transfers.

Digital marketing freelancer Shivay Madan, 21, prefers bank transfers due to their cost-effective structure. “With most bank transfers from countries like Singapore and Malaysia, I get the exact amount generated in my invoice. However, this is not the case with bank transfers from the US or UK,” he said. Businesses in the US and UK prefer PayPal or Stripe over bank transfers due to the high commissions.


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Apart from the transaction fee, Indian banks charge a fee of 100-300 for issuing a Foreign Inward Remittance Certificate (FIRC) per certificate. A FIRC must be obtained by the freelancer for each incoming transfer.

Online transfers: PayPal or Stripe are the most popular online options but carry the highest fees (see table). Other new-age money transfer platforms such as Winvesta, Payoneer, Xoom, Wise and Salt, among others, charge a fixed fee of 0.8-2% on the total amount and offer currency conversion at mid-market rates.

Regulations in India do not allow holding foreign currency in an online wallet or in an online money transfer platform account. The amount transferred must be credited directly to the recipient’s bank.

Most money transfer platforms allow transactions through a multi-currency virtual bank account (see table).

“We create a virtual bank account in the country where the freelancer’s client resides. The customer transfers the money locally to your virtual account, which is then transferred to the Indian bank account,” said Pal, co-founder of online money transfer platform Salt.

Swastik Nigam, founder and CEO of Winvesta, said these accounts would only be used as a transit account to bring money into India. “Money is not held in these accounts overnight and there is only one beneficiary of the account, which is your Indian bank account.” Asked whether these accounts qualify as foreign assets, Nigam said they did not, as there were no funds “Although not required, the client can declare the virtual account in the register of foreign assets in the ITR and indicate the balance as zero,” he said.

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