What is a commission on money transfers?
A perpetration is the fee that a shipping service provider charges to process your remittance. This is the visible cost of the transaction: what the service charges you as the sender to facilitate the transfer.
The commission can be a fixed fee (for example, $3.99 per shipment regardless of the amount), a percentage of the amount sent (for example, 2%), or a combination of both.
However, the commission is only one of the two components of the real cost. The other is the margin that the supplier applies to the Exchange rate. To know the true cost of a shipment, you must consider both.
Types of fees when sending money
Why “no commission” doesn't always mean cheaper
A number of services are advertised with “zero commission” or “no charge”. What they usually don't say is that they recover that margin by applying a less favorable exchange rate. You see $0 in commission, but your family member gets less money than they would with a service that charges a small commission and uses a rate closer to the market.
The only way to compare accurately is to look at the total amount your beneficiary receives, not just what appears as commission on the screen.
Fixed commission vs. percentage commission
- Fixed commission: suitable for medium or large shipments, because the cost does not scale with the amount.
- Percentage commission: It may be more expensive in large shipments if the percentage is high.
- No declared commission: Always check the exchange rate they offer. The hidden margin can be greater than a transparent fixed commission.
To understand how costs work in detail, check out the full guide: Remittances and money transfers from the US: everything you need to know.