what is cheaper to send money?

If you need to send money to family, friends, acquaintances or customers in another country, perhaps you have found yourself with rates so high that you would lose a lot of money to send a few dollars across the world, through digital payment gateways such as PayPal or the traditional banking system.

Also exchanges usually fix rates well above those required to send money using bitcoin (BTC) outside their platforms, as explained in previous reports.

These fees make sending BTC more expensive, but … is it cheaper to send money using traditional banks in your international transfers? Is it a better option to use digital payment services like PayPal, Skrill or Zelle? Is withdrawal from exchange sites to send bitcoin a viable option?

Average fees on Bitcoin exchanges

In our report on exchange withdrawal fees, we found some exchanges with fees between 40,000 and 100,000 satoshis (0.0004 and 0.0010 BTC) for bitcoin withdrawals.

This excess in fees ends making a system that allows sending funds without borders much more expensive, as the main cryptocurrency on the market. It is not advisable to keep the funds in BTC within exchanges. Mainly, because it is a third party, which makes you depend on their security system to protect your money.

However, there are those who prefer it that way. Among other reasons, to have a more direct way to move between BTC and other cryptocurrencies, including stablecoins, or move to fiat currency. Therefore, exchange withdrawal fees (via which you can send BTC to addresses of a third party outside the platform) they affect your ability to trade internationally.

To get into context, let’s look at the rates of some of the exchanges. The Korean Bithumb is the one that charges the most BTC for withdrawals. Those 0,001 bitcoins charged by this exchange are now equivalent to more than 35 dollars, with the price of cryptocurrency over $ 35,000.

On Bithumb, it costs 0.001 BTC to withdraw bitcoin. Source: Bithumb.

In mid-April, when bitcoin set its current all-time price high above $ 64,000, the commission to withdraw from Bithumb would amount to about $ 64. For exchanges such as Bitfinex, Huobi, OKEx, Poloniex, Bitstamp, Kucoin and Binance, the amounts range between 13 and 20 dollars to withdraw bitcoin, regardless of the amount to send.

As we discussed at the time, these fees charged by exchanges do not correspond to what the Bitcoin network actually requires to process transactions. However, if it is your choice to keep funds on these platforms, you might want to look first at the best options for when you want to withdraw funds or send BTC to others outside of your exchange.

According to mempool data.space, with a commission less than one dollar can confirm a transaction in the first blocks currently mined. At the time of writing this article, the network is little congested and commissions low.

But exchanges do not adapt their own commissions to the network, so low congestion does not cause those fees to be reduced. The vast majority charge flat rates. And not only do they overcharge their customers, but contribute to inflate network commissions, paying fees well above the necessary, as we confirmed in another recent report.

To enter the first block, you could pay about 10 satoshis per vbyte, although the average is about 70 sats / vbyte. Source: mempool.space.

Commissions on the Bitcoin network are measured in satoshis per vbyte of digital peso. In many cases, such as the current one, with less than 10 satoshis per vbyte, your transaction can be confirmed in a short time, but the commission surcharge from exchanges and other services causes the averages to go up quickly.

International transfers in banks

Even with the excessive fees of exchanges (and their contrast to what the Bitcoin network actually requires), sending money from these platforms to a third party anywhere in the world using BTC is still less expensive than through many banks, although there are several exceptions.

US banks, for example, they charge between 35 and 50 dollars for an international transfer outgoing. That list includes banks like Chase, Bank of America or US Bank.

In Spain, Caixabank charges 15 euros per international transfer, while BBVA has a commission of up to 30 euros. However, the Spanish case is different from that of the United States. To transfers in euros, Swedish kronor or Romanian leu between countries of the European Union, Liechtenstein, Norway and Iceland, fees do not apply.

If we move to Latin America, there is greater inequality between certain countries. In Argentina, Santander can charge more than $ 35 for an international transfer. Bancolombia reaches $ 32 and Banesco Panama has a fixed rate of $ 25.

In other countries, there are banks that charge lower fees. BancoEstado, in Chile, charges a maximum of $ 9 for these operations; while Interbank in Peru charges about 15 dollars plus percentages less than 1% of the funds to send.

The rates of BancoEstado (Chile) range from 4 to 9 dollars for international transfers. Source: bancoestado.cl.

PayPal, Zelle and other digital payment services

While bitcoin and other cryptocurrencies have become increasingly popular, so have the variety of digital services for sending and receiving money it has increased significantly.

Millions of people in an increasingly globalized and digital world have turned to platforms such as PayPal, Neteller, Skrill or Zelle to manage cross-border payments of all kinds.

However, fees are not always favorable for such transactions. PayPal is perhaps the most popular service among digital payments. But many customers have the constant complaint of high commissions, which can reach up to $ 5 or 4.5% of the amount to be sent in cases that require conversion from one currency to another, depending on the region of each user.

For Neteller, commissions can range from 1.45% to 2.99%, up to about $ 3 per 100. Skrill, on the other hand, can charge up to 4.99%, which would equal almost $ 5 for every 100 sent.

Fees for international transfers at Skrill. Source: skrill.com.

Among digital payment services, Zelle has been gaining notoriety in recent times. Particularly in countries like Venezuela, where there are not the same facilities for sending money internationally. But the main attraction of Zelle is that it connects with US bank accounts and allows you to send money without commissions from those accounts. Therefore, it is a good option to receive and send payments or remittances between US banks.

Peer-to-peer Bitcoin: low fees, decentralization and few limitations

After comparing the fee levels of exchanges, banks and digital payment services, we can see that banks are often the worst option for sending money across borders. Especially if you’re sending low amounts.

Digital services have the cons of handling commissions in percentage terms, so as the amount becomes higher, so will the commission to process your transaction.

As for other features, there is one shared by the three shipping methods: their centralization. In all cases, you depend on the conditions of a third party to send money. You can be the victim of money withheld, lost or delayed by the action of each of the companies, be it an exchange, a bank or any digital payment platform.

Digital services have many advantages, but one of their biggest disadvantages is that sending is done between users of the same platform: to send money in PayPal, your counterparty must have a PayPal account. Same case for Zelle and other services. This does not happen with banks or exchanges. Some of the latter allow sending money between accounts of the same platform without commissions, although with some cryptocurrencies other than bitcoin.

A single option combines the best of each alternative: the Bitcoin network. If you send money directly on the Bitcoin network, you can define the commission according to the state of the network, as long as you use a self-funded wallet that allows it (there are many free options on the market).

In addition, your counterparty must not have the same wallet as you for the transaction to work, and once you submit your transaction, a third party cannot veto, reverse or stop it, unlike banks or payment gateways.

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