Cost of sending $100 in cash or in crude oil overseas still about the same

The title should be even more shocking than I know how to write it.  The year is 2013, one year after over the 1 billionth smartphone came on-line, and the state of digital technology still allows a comparison like this:

As ridiculous as it may seem to compare the cost of sending equal amounts of value in two radically different ways (I could easily carry 100x US$100 bills in my pocket on my next flight to Canada or India, but wouldn’t dream of air freighting a barrel of oil), the pain and the opportunity in this greatest of modern problems is probably concentrated on the easy to ignore middle ground.  The actual monetary cost of sending $100 is “only” about $3, and often less for smaller amounts where most of us wouldn’t bother shopping around or complaining too much.  On the other hand, the cost of sending $1,000,000 would probably be limited to about US$15 (the cost of a typical wire transfer) or a mere 0.0015% of the amount sent, about a day’s interest at 0.5% per annum, plus an “institutional” cost for foreign exchange.

As much as we feel PayPal earns their fee, I’m sure it’s not because they are still hiring for jobs like this.

The cost is worst in the middle for transfers between about US$500 (where 3% = $15) and $25,000 (a rough minimum for getting good foreign exchange rates), and I would love to see statistics on what percentage of the world’s overseas transfers fall in this range.

When in person, I have found the lowest cost for receiving money has been to simply use my no-fee Visa ATM and credit cards, where I get pretty close to an inter-bank FX rate and don’t need to pay an additional fee.  Unfortunately, this doesn’t work for “financial” transactions like moving paychecks or stock sale proceeds back and forth as regularly as I’d like.  I’m fortunate my bank gives me one wire transfer per month, but as with ATM fees, I’m sure there is plenty of room for optimization.

In the days when Spain shipped masses of silver from Potosí, (or sugar from Cuba) risks like these easily justified foreign transfer fees greater than 1%

So for anyone who thinks I may talk about bitcoin a bit too often, I am still looking for another currency or payment system that makes it even 1/10th as cheap and easy to send money across borders!

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