How Wise Works: Fees, Exchange Rates, Transfers, and When It Makes Sense to Use It
Wise, formerly known as TransferWise, has become one of the most widely used platforms for international money transfers. It is often promoted as a cheaper, faster alternative to traditional banks, particularly for individuals and businesses that move money across borders regularly. However, understanding how Wise actually works behind the scenes is essential before deciding whether it is the right solution for a specific use case.
Wise operates differently from banks and many legacy remittance providers. Its pricing model, transfer flow, and infrastructure are designed to reduce foreign exchange costs and increase transparency. This article explains how Wise works, how it makes money, what fees users actually pay, how exchange rates are applied, and when Wise is the most suitable option.
Table of Contents
What Wise is and how it differs from banks
How Wise international transfers work step by step
Wise fees explained in detail
How Wise exchange rates work
Transfer speed and settlement timelines
Wise Multi-Currency Account explained
Wise debit card and spending features
Wise for businesses and freelancers
Limitations and situations where Wise may not be ideal
Common mistakes users make with Wise
FAQs
Sources used for this article
What Wise is and how it differs from banks
Wise is a financial technology company focused on cross-border money movement. Unlike traditional banks, Wise does not rely heavily on correspondent banking networks to move money internationally. Instead, it uses a network of local bank accounts in multiple countries to match incoming and outgoing transfers.
This structure allows Wise to avoid many intermediary fees and delays associated with international bank transfers. Rather than sending money across borders in the traditional sense, Wise often moves money locally on both sides of the transaction, reducing cost and complexity.
Key differences between Wise and banks include transparency, pricing structure, and speed. Banks typically bundle foreign exchange margins into their rates, while Wise separates fees clearly from exchange rates.
How Wise international transfers work step by step
A typical Wise transfer follows a structured flow:
The sender creates a transfer and selects currencies and amount
Wise shows the real mid-market exchange rate
Fees are displayed transparently before confirmation
The sender sends money to Wise locally
Wise pays out the converted amount locally to the recipient
In many cases, no money actually crosses borders. Wise uses local liquidity pools to settle transactions, which significantly reduces transfer time and cost.
This system is sometimes referred to as a “local-to-local” model rather than a traditional international wire.
Wise fees explained in detail
Wise uses a transparent fee model made up of two main components:
A fixed fee
A variable percentage fee based on currency pair and amount
Fees vary depending on:
Currencies involved
Transfer size
Payment method
Bank transfers into Wise accounts are usually the cheapest. Card payments often carry higher fees due to card network costs.
Wise does not charge hidden markups on exchange rates. All costs are shown upfront before the transfer is confirmed.
How Wise exchange rates work
Wise uses the mid-market exchange rate, which is the rate you see on global currency markets and financial news platforms. This is the midpoint between buy and sell prices and is considered the fairest reference rate.
Unlike banks, Wise does not inflate exchange rates to generate hidden profit. Instead, it earns revenue through transparent fees.
Exchange rates are typically locked for a short period once a transfer is initiated. If funds are not received by Wise within that window, the rate may be recalculated.
Transfer speed and settlement timelines
Transfer speed depends on:
Currency corridor
Payment method
Recipient bank
Compliance checks
Many Wise transfers complete within hours or one business day, especially when both currencies are supported locally. Some corridors may take longer due to local banking infrastructure or regulatory requirements.
Wise provides estimated delivery times before confirmation and updates users throughout the process.
Wise Multi-Currency Account explained
The Wise Multi-Currency Account allows users to hold, send, and receive money in multiple currencies under one account.
Key features include:
Local bank details in several countries
Ability to hold balances in dozens of currencies
Low-cost currency conversion
Integration with Wise debit card
This account is particularly useful for expatriates, freelancers, remote workers, and international businesses.
Wise debit card and spending features
Wise offers a debit card linked to the Multi-Currency Account. The card automatically uses the balance in the local currency when available or converts funds at the mid-market rate when needed.
Spending features include:
Online and in-store purchases
ATM withdrawals
Spending in multiple currencies
Fees apply for some ATM withdrawals and conversions, but rates remain transparent.
Wise for businesses and freelancers
Wise Business accounts are designed for companies and independent professionals that operate internationally.
Business features include:
Multi-currency invoicing
International salary payments
Mass payouts
API integrations for platforms
Wise Business is commonly used by startups, marketplaces, and service providers with cross-border operations.
Limitations and situations where Wise may not be ideal
Wise is not a full replacement for traditional banks.
Limitations include:
No cash deposits
Limited lending products
Transfer limits in some corridors
Not suitable for very large corporate treasury operations
For complex financial needs, Wise is often used alongside a traditional bank rather than instead of one.
Common mistakes users make with Wise
Common mistakes include:
Using cards instead of bank transfers unnecessarily
Missing rate lock windows
Ignoring local withdrawal limits
Treating Wise as a full bank replacement
Understanding these limitations improves overall experience and outcomes.
FAQs
Is Wise cheaper than banks for international transfers?
Wise is usually cheaper than traditional banks because it uses the mid-market exchange rate and charges transparent fees rather than embedding costs into inflated exchange rates. For frequent or medium-sized transfers, this pricing model often results in significant savings over time, especially compared to banks that apply wide foreign exchange margins.
How does Wise make money if it uses real exchange rates?
Wise earns revenue through clearly disclosed fees rather than hidden exchange rate markups. These fees vary by currency pair and payment method and are shown before a transfer is confirmed. This model aligns Wise’s incentives with transparency rather than obscured pricing.
Is Wise safe to use for international money transfers?
Wise is regulated in multiple jurisdictions and uses strong security, identity verification, and safeguarding practices. Customer funds are held separately from company operating funds, reducing risk. While no platform is risk-free, Wise follows strict regulatory standards in the markets where it operates.
How fast are Wise international transfers?
Many Wise transfers complete within hours or one business day, especially when both currencies are supported locally. Transfer speed depends on banking infrastructure, payment method, and compliance checks. Wise provides estimated delivery times before confirmation to help manage expectations.
Does Wise work for sending money to India?
Yes, Wise supports transfers to India and is commonly used for family support, tuition payments, and personal remittances. Delivery speed and limits depend on local banking rules and recipient bank details. Compliance requirements may apply for certain transaction types.
Can Wise replace a traditional bank account?
Wise is not a full replacement for a traditional bank. It does not offer loans, cash deposits, or full domestic banking services in every country. It works best as a complementary tool for managing international money alongside a regular bank account.
Are Wise exchange rates guaranteed?
Wise locks exchange rates for a limited time during the transfer process. If funds are not received within that window, the rate may change. Rate locking helps protect users from short-term market volatility but requires timely funding of transfers.
Is Wise suitable for businesses?
Wise Business is well suited for startups, freelancers, and companies with international payments. It supports multi-currency accounts, mass payouts, and integrations. Very large enterprises with complex treasury needs may still require traditional banking relationships.
Sources used for this article
Wise official website and pricing documentation
https://wise.com
World Bank, Remittances and Cross-Border Payments
https://www.worldbank.org/en/topic/migrationremittancesdiasporaissues
Bank for International Settlements, Cross-Border Payment Systems
https://www.bis.org
International Monetary Fund, Payment Systems and FX Markets
https://www.imf.org/en/Topics/payments
