Sending money between Germany and India: what it really costs

Most people who move money between Germany and India look at one number: the fee. It is printed in large type, it is often small, and sometimes it is zero. But the fee is only part of the cost. The larger part is usually hidden in the exchange rate.

This guide explains where the cost of a transfer comes from, how to measure it against a neutral benchmark, and how to compare two quotes yourself. It does not rank or recommend any bank or service. The method works for any of them.

The three places a transfer costs you money

A transfer between euros and rupees can cost you in three places:

1. The exchange-rate markup. The rate you are offered is almost always a little worse than the market rate. The gap is a cost, even though it is not listed as a fee.
2. Fixed or percentage fees. This is the fee you see. It can be a flat amount per transfer, a percentage of the amount, or both.
3. Charges along the way and at the other end. Some transfers pass through one or more intermediary banks, which may deduct a charge. The receiving bank may also charge for handling an incoming payment from abroad.

Only the second item is usually shown as a "fee". The first is built into the rate, and the third often shows up only when the money arrives and the amount is lower than you expected.

What the exchange-rate markup is

Currencies are traded all day. At any moment there is a price in the middle between what buyers pay and what sellers ask, often called the mid-market rate. Banks and transfer services buy currency close to that price. When they sell it to you, they usually offer a less favourable rate and keep the difference.

That difference is the markup. It is normally a percentage. On a small transfer a markup of a few per cent may look like nothing. On a large transfer, or on transfers you make every month, it adds up.

A "zero fee" or "no commission" transfer is not necessarily free. It often means the cost has moved into the rate.

A neutral benchmark: the ECB reference rate

To measure a markup you need a rate to compare against. A practical, public benchmark is the euro foreign exchange reference rate published by the European Central Bank. The ECB publishes one rate per currency, including the Indian rupee, on each working day, usually in the afternoon Central European Time. The ECB says these rates are for information purposes only.

The reference rate is a single snapshot of the market on that day. Real rates move during the day, and no provider will give you exactly this rate. That is fine. The point is to have one fixed, neutral number you can hold every quote against. If two quotes on the same day are compared with the same reference rate, the comparison is fair.

On weekends and public holidays there is no new reference rate. In that case, use the rate from the last working day and keep in mind that the market may have moved since.

How to work out the real cost of a quote

You need four numbers:

1. What you pay in total, in euros. The amount you send plus any fee added on top.
2. What arrives, in rupees. The amount the recipient actually receives, after every deduction.
3. The ECB reference rate for that day. Rupees per euro.
4. The reference value. What you pay in euros multiplied by the reference rate. This is what your money would be worth in rupees at the benchmark rate, with no costs at all.

Then:

• Total cost in rupees = reference value − rupees received.
• Total cost as a percentage = total cost ÷ reference value.
• Total cost in euros = total cost in rupees ÷ reference rate.

This one percentage includes the markup, the visible fee and any deductions you can see in the amount received. It is the number to compare.

If you send money the other way, from rupees to euros, the idea is the same. Rates are still usually quoted as rupees per euro, so a higher rate is worse for you when you buy euros, and a lower rate is worse when you sell euros.

Comparing two quotes

The lesson is not that one kind of quote is always better. A fixed fee weighs heavily on small transfers. A percentage markup weighs heavily on large ones. You only know which is cheaper for you when you work out the total cost for the amount you actually send.

Costs that do not show up in the quote

Some costs appear only when the money arrives. When you compare, ask about them before you send:

• Intermediary bank charges. International bank transfers can pass through correspondent banks. Each may deduct a charge from the amount in transit.
• Who pays the charges. Many international transfers let the sender choose a charge option: the sender pays all charges (often labelled OUR), the costs are shared (SHA), or the recipient pays them (BEN). The same transfer can arrive with different amounts depending on this choice.
• Receiving bank charges. Some banks in India charge a handling fee for incoming foreign payments or for converting them, and tax may apply to that service. Your recipient's bank can tell you what it charges.
• How the transfer is paid for. Paying for a transfer by card instead of bank transfer can add a charge.
• Timing. A quote may be fixed for a short time only. If the rate is not locked when you pay, the rate you get may be different from the one you saw.

The simplest way to catch all of these is to compare what you paid with what actually arrived, not with what the quote said would arrive.

Why the yearly number matters

A single transfer can look cheap. Regular transfers are different. If you send money home every month, the same cost repeats twelve times.

This is not a reason to send less often or more often. How often you send money depends on your own needs. But knowing the yearly figure makes it easier to judge whether it is worth spending a few minutes comparing quotes.

A short checklist before you send

• Write down the total you will pay in euros, including every fee.
• Ask what exact amount will arrive in rupees, and whether any charges may be deducted on the way or at the receiving bank.
• Check whether the rate is locked, and for how long.
• Look up the ECB reference rate for the day and work out the total cost as a percentage.
• After the money arrives, compare the amount received with your calculation. Keep a note; it helps next time.

Check a transfer with the calculator

Our free transfer cost calculator does this arithmetic for you. Enter the amount, the rate you got and any fee. It fetches the ECB reference rate for your date and shows the markup and the total cost per transfer and per year. What you type stays in your browser.

If you are building a buffer for the unexpected, the emergency fund calculator shows how many months you are covered.

This guide is general information about how transfer costs work. It is not a recommendation of any bank, service or way of sending money. For more about what we are building, see the inWst home page.