Singaporeans studying abroad lose $446 every year due to this hidden fee

It may be expensive to study abroad, but hefty tuition fees are pretty much inevitable once you decide that a degree from a Singapore university isn't for you. 

There is, however, another kind of fee that is possible to minimise while living abroad. It's a fee that not enough Singaporean students overseas are aware of, and one that costs them an average loss of S$446 each year, according to a study by Wise.

If you haven't already guessed it, the culprit we're talking about is money transfer fees.

How do money transfer fees work, such that one can lose S$446 annually money because of them? And what can Singaporeans studying overseas do to reduce this number? Let's take a look.

1. Singaporeans studying abroad lose S$446 in money transfer fees each year.

Let's begin by looking at the data. Tons of Singaporean students fly overseas to study each year. In 2022, there were about 21,666 Singaporean students studying abroad. Of these, many students choose to study in countries like the USA, New Zealand, Australia, UK, and Canada. These countries are among the top few most popular destinations for Singaporean students-but also some of the most costly.

According to a study by Wise, Singaporeans pursuing their education overseas spend anywhere between $10,560 to a whopping $46,042 (I'm gaping at you, USA) on their education. Mind you, that's for each year, not the total for their entire degree programme.

Our local Singapore universities and their scholarships are suddenly looking a lot more attractive, eh?

But paying for an education is one thing. Paying money just to transfer money is a whole different issue. In the USA, New Zealand, Australia, UK, and Canada, Singaporean students lost an average of S$446 each year to money transfer fees. The highest losses ($559) were recorded in the beautiful land of the haka and sheep-New Zealand.

Among these top five most popular destinations, education costs in Australia were the lowest at $10,560. Yet, according to the study, the average Singaporean student spent $445 each year on transfer fees. That's more spent on transfer fees than students in the UK and Canada, where the education costs are more than twice that of Australia's on average. Not cool, mate.

2. What are money transfer fees?

Money transfer fees are the fees a financial institution charges you when you transfer money from one account to another account overseas. Notice that we're saying "financial institution" — you can transfer money using a bank or a remittance service (remittance is a fancy word for "sending money").

Money transfer fees usually cover three types of charges:

1. Handling commission or handling charge: Think of this as an admin fee for handling your money across the lands and seas.
2. Cable charge: If you're visualising an actual wire cable, you're not totally off. The cable charge covers the time and effort spent on making contact with the bank that receives your money. It's usually a fixed amount per transaction.
3. Agent bank charge: The "agent" here doesn't refer to your talent agent, property agent, or a secret agent. It refers to the receiving bank, known as the agent bank, which will impose an agent bank charge to cover the trouble they went through to communicate with your bank/remittance provider.

3. How much do money transfer fees cost?

Money transfer fees vary for each bank/remittance service and the type of account you have with them. The fees charged can be variable or fixed:

• Percentage of the amount transferred. For example, UOB's remittance fees via online banking are 0.0625 eper cent of the sum transferred, with a minimum of $10 and max of $100.
• Fixed amount for different amounts of money transferred. For example, DBS Outward Telegraphic Transfers fees are $5 for amounts ≤ $5,000, $10 for amounts ≤ $25,000, and $35 for other amounts.

Using the figures above as an example, let's see how much you'd have to pay in money transfer fees if you want to transfer S$5,000, S$10,000, and S$20,000.

	Variable (percentage) money transfer fees	Fixed money transfer fees
Money transfer fee rates	0.0625per cent (minimum of $10 and max of $100)	$5 for amounts ≤ $5,000; $10 for amounts ≤ $25,000; $35 for other amounts
Fees for a transfer of $5,000	$10	$5
Fees for a transfer of $15,000	$10	$10
Fees for a transfer of $30,000	$18.75	$35

As you can see, it's not always the case that one fee structure is cheaper than the other. You've gotta be mindful of the amount you’re sending overseas and the way the money transfer fees are calculated in order to not lose out.

Speaking of losing money…

4. Tips to save costs when transferring money overseas - how do I avoid overpaying money transfer fees?

Here are some tips if you want to avoid spending more than you need to on transferring money overseas.

Compare money transfer services

If you're looking for the best deal on a new phone, you know you've got to do some research. "Just buy from the first shop or listing you see!" said no savvy shopper ever.

The same goes for money transfer services. Check charges for banks as well as other providers, and start off by looking for $0 transfer fee services. This depends on the country you're sending money to, and the currency you're converting your SGD to.

If you, like most Singaporeans, have an account with DBS, DBS Remit offers $0 transfer fees for transferring money in 19 currencies to over 50 countries, including the USA, Canada, UK, and Australia. Standard Chartered also has a list of about 15 pairs of countries and their corresponding currencies (e.g. Japan+JPY, UK,+GBP) that they charge zero transfer fees for.

However, if you're transferring money to a country that's not on DBS's list of 50, or if you're transferring money in a currency that doesn't match the destination country (e.g. USD to Australia), DBS charges flat rates. At this point, you want to compare the total fees for your country+currency pairing across a few banks and other providers. Compare money transfer plans easily on MoneySmart.

Mind any mark-ups and hidden fees

If you have to pay money transfer fees, keep them low. Don't be lured in and fooled by wording like "from as low as $1" and assume that minimum applies to your transfer.

When it comes to minimising the amount you spend on money transfer fees, it pays to be meticulous. Be mindful of exchange rates that may be marked up. Some banks may have mysterious "interbank transfer" fees that they hide and suddenly spring on to you. You should look at the rates advertised and do your own math to figure out how much you should be paying, so that you know if the bank is charging you extra when you get the final figure.

Pay in the local currency - get yourself a debit or credit card overseas

While there certainly are credit cards great for overseas spending, these aren't going to cut it if you're basically going to be living in that country for months or years. Most credit cards charge a 3.25 per cent foreign transaction fee, and that's really going to add up if you keep using your credit card from home to buy everything overseas.

To avoid forking up unnecessary conversion fees, you always want to pay in that country's local currency. That means getting yourself a local debit or credit card.

Get a multi-currency account

As the name suggests, a multi-currency account lets you store, send, or receive money in, well, multiple currencies. Some multi-currency accounts come with $0 foreign transaction fees and $0 overseas ATM withdrawal fees (up to a certain monthly cap), and their own debit card, so they're a strong contender in the overseas money transfer game. Here are some multi-currency cards and accounts you can consider:

ALSO READ: Loyalist vs deals chaser: Is disloyalty the key to maximising loyalty programmes?

This article was first published in MoneySmart.