Remittance Cost
What a remittance really costs once the fee and a weak exchange rate are counted.
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Formula
How the calculation works
A remittance has two costs and only one of them is on the receipt. The visible fee is a share of what you send, and here 2% of 1,000 is 20, so 980 travels. The invisible cost is the rate: at an offered 100 the 980 delivers 98,000, while the market rate of 105 on the same 980 would give 102,900, a shortfall of 4,900 on top of the 20.
The two are not comparable in size, and the rate usually wins. The tool measures both in the destination currency, because that is where the loss actually lands, and its total cost for the example is 9,000. The fee accounts for 2,000 of that and the weak rate for 7,000, so a provider advertising a zero fee but paying 100 is charging you seven times what the fee would have been.
The arithmetic assumes the rate is fixed for the transfer, which is how most quotes work but not how the market behaves. If the rate moves in your favour while the money is in flight, the loss shrinks and can turn negative, and the tool will show a negative total cost rather than clamping it to zero. That is a gain, not a bug, and it is worth reading as such.
Common mistakes
- Choosing a provider on the fee alone. A zero fee with a rate of 100 costs 7,000 on 1,000 sent, where a 2% fee at the market rate costs 2,000.
- Comparing the exchange rate to the number you saw in the news. The tool compares it to the market rate you supply, and a mid-market quote is not the rate anyone actually pays.
- Forgetting that the fee also loses the rate. The 20 fee never travels, so it is really 20 times 100, or 2,000 in the destination currency, not 20.
When to use it
- Use it before you send, to compare two providers that look identical on the fee line, and to see the true loss in the currency your family receives rather than in the one you send.
- Do not use it to time the market. It takes whatever market rate you give it, so if you do not know the current rate, look it up first; the tool cannot fetch it and will not guess.
Worked example
Sending 1,000 at 2% and a rate of 100 delivers 98,000, where the market rate of 105 would give 105,000 — a 7,000 loss, far more than the fee.
Common questions
Is the cheapest fee always best?
No. A zero fee is often paired with a poor rate, and that loss dwarfs the fee. Both must be judged together, which is what this does.
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