Reviews

Transferwise vs Xoom (Comparison & Shootout)

Thanks to the internet, international money transfers are now easier than ever.

Transferwise and Xoom are two very popular companies that handle money transfer services to different countries. The two companies both have a similar purpose, but there are some differences that may make it pertinent to choose one over the other. 

So we are going to cover both TransferWise and Xoom to see which is a better option for international money transfers.

We will cover their features, cost, pros, cons and will then give our verdict on which money transfer company, Transferwise vs Xoom, is the best to use. 

Transferwise Overview

Transferwise is an international money transfer service that allows you to send money to over 80 countries.

The best part of Transferwise is how streamlined the platform is. You can send money through your bank account or debit or credit card, and they have very low exchange rates for foreign currencies. 

Transferwise was first launched back in 2011 by Kristo Kaarmann and Taavet Hinriku. The duo founded the company in an effort to create an easy-to-use service for transferring money across borders.

The real draw of Transferwise is that they charge mid-market exchange rates for currency transfers, which is much lower than the extra percentage you would have to pay at a traditional banking institution and bank account.

Transferwise has proved to be very popular and now currently has a 6 million-strong customer base and has facilitated nearly £3 billion in transactions. 

Transferwise Prices

The “mid-market” exchange rate refers to the differences between the buy and sell price of two pairs of currencies.

In other words, mid-market exchange rates are basically a measure of how much you will be paying for the currency transfer and how much institutions will sell it for.

For example, if a seller wanted to pay £1.6 against USD and the seller wanted to sell it for £1.8 against USD, then the mid-market exchange rate would be 1.7 GBP/USD. 

When transferring currencies through large banking institutions, they will often tack an extra percentage on top so they make a tidy profit from the transfer.

So even though you can look up mid-market exchange rates on Google, if you pick a large-scale institution, you will probably have to pay more. 

Transferwise is known for its low fee structure. The exact amount of fees you have to pay depends on the specific currency you want to transfer, how much you want to transfer, and what payment options you use.

All other things being equal, it is usually the most expensive to fund these kinds of transfers using a credit card. 

Let’s use a specific example to get some numbers on the table. AS of the time of writing, the exchange rates between the GBP and EUR is £1=€1.13. If you send £1,000 using Transferwise, then they would take a £3.75 fee (which includes a £0.26 flat fee and a £3.49 variable fee) and the recipient would receive €1,125.77).

This fee is much lower than several other institutions. For example, if you used Nationwide to send the exact same transfer amount, you would have to pay a £20 fee.

So, if you transferred the money using nationwide instead of Transferwise, then the recipient would relieve less money overall. 

So, while transfers are not commission-free on Transferwise, they are typically much lower than what you would get at a traditional financial institution. At a traditional financial institution, you would likely have to pay a much higher flat fee in addition to a 3-5% rate on top of mid-market exchange rates

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How Does Transferwise Work?

Now that we talked about pricing, let’s talk a bit about how Transferwise works. Transferwise has a very simple and streamlined layout.

From your account home page, enter in the type of currency you want to send. Once you make your selection, you will see a breakdown of the exact amount of fees you will pay.

This is a very nice feature because the fee structure for these kinds of things can be pretty obtuse, so it’s a good thing that Transferwise is very transparent about it. 

Once you select the currency, you need to enter the details of the recipient of the funds. Keep in mind that the recipient must have a bank account to receive the funds.

When you do this, you will also pick a reference number that you can choose. Make sure that you carefully enter the recipient details. Transferwise will not take responsibility if you put in the wrong details and the money goes to the wrong person. 

Next, you need to transfer the funds. You can do this with a debit or credit card entirely online through the site. But if you choose a bank account, then you will need to do some extra work to make the money go through.

It is vital that you remember the reference number or else your money could be delayed. 

Once you finish the transfer process, then you just wait for an email confirmation. Once the transfer has been received, they will take care of everything else.

Typically, it takes about 2 days to complete a transfer, but this depends on where the recipient is and what kind of currency you are exchanging. 

Transferwise Pros

  • Low fees. Transferwise has some of the lowest fees in the business and it is a much better option to use Transferwise instead of large bank transfers. 
  • Streamlined process. It’s effortless to send money with Transferwise and you will get a full breakdown of what fees you’ll have to pay. 
  • No exchange rate markup. Transferwise does not charge an extra fee on top of mid-market exchange rates. 

Transferwise Cons

  • Deliveries take time. A debit or credit card transfer can go through in just minutes, but an ACH bank account transfer can take a few days. However, bank transfers are the cheapest and so the best option to choose from. 
  • Limited customer service. Transferwise has relatively limited customer service. You can only call on weekdays between 9 AM and 5 PM EST. 

Xoom Overview

Xoom is owned by PayPal, which is known as one of the most popular and fast ways to transfer money online.

Like Transferwise, Xoom is also an international money transfer service designed to help you send money overseas without having to deal with the frustration of big banks. Xoom allows person-to-person transfers and currently operates in over 66 countries. 

Xoom has actually been around for a while. It was first launched way back in 2001, shortly after the creation of PayPal. As such, Xoom is actually one of the first international money transfer services on the web. 

With Xoom, you can transfer money between a wide range of countries throughout Latin America, Central America, and Europe, such as the Dominican Republic, Vietnam, Guatemala, France, Germany, and more.

The one catch is that the sender of the money has to be based out of the US, Canada, and the United Kingdom.

Xoom Prices

Xoom charges its customers differently than Transferwise. Unlike Transferwise, Xoom will add an extra charge on top of the mid-market exchange rate for currency transfers.

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Xoom charges a flat £1.99 transfer fee, no matter what kind of payment options you use to fund the transfer whether it’s credit cards, bank account, or PayPal. 

In addition to this flat transfer fee, Xoom also charges additional fees based on the specific transfer amount and payment method. Unfortunately, there is low transparency about these fees.

When you use the price checker on their website, they only tell you about the initial flat fee. This is probably because the other fees depend on the current exchange rate of the currencies in question, so they are subject to change throughout the day. 

Since they charge a rate on top of the mid-market exchange rate, then means that you will often end up paying more to transfer a specific amount than you would with another service.

However, Xoom has some decent features that might make up for this higher price. For example, you can create an account directly from PayPal and fund it with a PayPal account.

They also offer a money-back guarantee if your money does not make it through the transfer, however, Xoon does not offer multi-currency funds transfer.

Ultimately, though, transferring money through Transferwise will likely be cheaper, no matter what kind of funding method you choose.

This is because Transferwise does not charge a markup on the mid-market exchange rate, and instead calculates a specific fee based on the transfer amount.

So, if you are looking for the absolutely cheapest option, then Xoom may not be your best choice. 

How Does Xoom Work?

Sending money with Xoom is also very streamlined and straightforward.

Once you create an account from your PayPal account, you can select the country that you want to send money to, Xoom allows you to send money to a lot of different countries, however, the sender has to be located in the US, Canada, or the UK. 

One of the best features is the Xoom does not require the recipient to even have a bank account, let alone an equivalent Xoom account.

When you send a transfer, you will create a unique reference ID and get a tracking number. You can send the money to a store or bank, and the recipient can pick the money up by showing them the reference ID and tracking number. 

However, Xoom only allows you to send money to individual recipients. Unlike Transferwise, there is no option to send money to institutions.

When you send the money, it will usually be ready within minutes or hours, depending on the method of funding and the exact location that you pick. Even when you fund your transfer with a bank account, which normally takes a few days with other services, the money you send with Xoom will be ready within a day.

Some transfer options may take a few days, but these are by far the minority. Most of the time, your money will be ready to be picked up by the recipient quickly. 

Xoom’s website is very neatly laid out and it is easy to work. You select the country you want to send to from a drop-down menu, then enter the currency and transfer amount that you want to send.

It also has a mobile phone app for iOS and Android with all the same features, but you can just use the desktop website for your transfers if you want instead of mobile phones. 

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There is one more important thing. Xoom has 3 levels of transfer limits, each one higher than the last.

At the first level, you can only send a max of £1,000 per day and £6,000 every three months. At the second level, you can send up to £10,000 a day and £30,000 every month. At the third level, you can send up to £25,000 a day and up to £100,000 a month. 

Whenever you attempt to exceed your limit at one level, you can upgrade your limits by sending extra documents and verifying your account.

For example, to upgrade to the level two limit, you would have to send your national ID number and a utility bill with your current address. So, keep in mind that you have to provide more information if you want to send large sums of money. 

Xoom Pros

  • Fast transfers. Xoom transfer options are quick, and we mean really quick. Most of the time, your money will be ready to pick up within minutes or hours and it will rarely take more than a day. 
  • Multiple pickup options. Xoom allows you to send money to different institutions so the recipient can pick it up. This means that the recipient does not have to have a Xoom account or even a bank account. 
  • Very high transfer limits. Xoom has really high transfer limits. You can send up to £25,000 a day and £100,000 a month at the highest limit. 
  • Compatible with PayPal. It is easy to set up an account and send money as you can fund it directly with your PayPal account. This is usually the fastest option to transfer money with Xoom. 

Xoom Cons

  • High fees. Compared to Transferwise, Xoom has fairly high fees. Xoom charges a markup on the mid-market exchange rate and a transaction fee based on the type of currency, location of the recipient, and method of funding. There is also not much transparency in the fee structure. 
  • Spending limits are initially low. At first, your spending and cash payout limits are pretty low. You can increase these by giving more information to verify your account. 
  • Personal transfers only. You can only send money to individual people using Xoom. There is no option for paying merchants. If you try to pay a merchant with Xoom then they might void the transfer. Xoom also does not have a multi-currency account option.

Which Is Better for Money Transfers, Transferwise vs Xoom?

Both Transferwise and Xoom have their pros and cons and might be more beneficial for some rather than others.

However, overall, we would have to say that Transferwise is the best of the money transfer providers.

Transferwise has lower processing fees across the board and also allows you to send money to and from more countries. Transferwise’s exchange times are a bit longer than Xoom’s, but it is worth the lower transfer fee. 

Transferwise does have less customer support, but Xoom’s customer support options are not that great either.

Xoom does have more transfer options than Transferwise, but their transparency about fees is lacking.

Overall, Transferwise is the better of the money transfer providers and you should choose it over Xoom.

Tom
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Fully qualified CISI Investment adviser for 5 year. Managed UK private client portfolios.
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Transferwise Review 2021 (Best Int'l Money Transfer Service?)

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