International money transfer is something millions of people do around the world each day. From the global company who pays international bills in Dubai, to the family who want to buy a house in Spain, to the migrant worker who sends money home to his loved ones – transferring funds is a regular task for most people.
But this very task can also be daunting and if not done smartly can be costly. Most people are not aware of the hidden fees that come with international transfers. When you use a bank, a foreign exchange broker or a money transfer company to send money abroad there are usually two costs involved. The most obvious is the cost of the service to transfer your funds. But then there is the not so obvious cost to convert your money from one currency to another.
These service providers never convert your money based on the inter-bank exchange rate and make a profit by exchanging your currency at a lesser rate. The profit they make from the difference is usually known as the ‘Spread’. DailyFX – a reputable foreign exchange news website offers a great explanation of how a spread is obtained. They say:
‘ Every market has a spread and so does Forex. A spread is simply defined as the price difference between where a trader may purchase or sell an underlying asset. Traders that are familiar with equities will synonymously call this the Bid: Ask spread.
Below we can see an example of the spread being calculated for the EURUSD. First we will find the buy price at 1.35640 and then subtract the sell price of 1.32626. What we are left with after this process is a reading of .00014. Traders should remember that the pip value is then identified on the EURUSD as the 4th digit after the decimal, making the final spread calculated as 1.4 pips. ‘
Now we know how to calculate the spread in pips, let’s look at the actual cost incurred by traders:
This is a common practice and a vital revenue stream for services conducting money transfer or currency exchange. However be careful because they are not always so upfront with this cost and frankly you could be incurring high costs without you knowing.
Below are a list of way you can make a safe international money transfer:
Money transfer through Banks
We all know them. They are large regulated financial institutions and are effective in transferring large funds due to their apparent security. Large corporations, small businesses and even individuals use banks to make an international money transfer every single day and are the still the most common method of money transfer. However banks are increasingly coming under scrutiny due to their hidden transfer fees and there are cheaper methods of performing this task especially if the amount you are sending is not extremely large. Banks typically charge individuals anywhere from £20 to £50 in fees for relatively small transfers (and this is without the spread included) and costs usually increase as the amount of transfer does. To transfer money through a bank just visit a local branch and ask a customer service adviser. Advise do your homework first! Not all banks charge the same amount.
Money transfer through Foreign Exchange Brokers
Foreign exchange brokers act as a middleman between the customer and the banks, they usually have relationships with a variety of banks and attempt to provide the most competitive rates to trade one currency for another. They primarily deal in currency exchange but are able to transfer funds for a fee. Most allow users to register online free to open an account. Foreign exchange services are beneficial when purchasing property abroad or for small businesses making international payments. When making an international money transfer of large amount they can offer really competitive exchange rates and can even waive the transfer fees. They a perfect for those large transfers which require sensitivity and assurance as there is always a dedicated representative to help you each step of the way. Some of the reputable FX services we compare include FC Exchange, UKForex and TorFX.
Money Transfer companies
Although money transfer companies have the same dual costs as banks and foreign exchange firms they are much cheaper when making international transfers in smaller amounts. They commonly use bank to bank transfer although some provide extra methods of receiving including cash pick up branches. Providers such as these have been around for a long time and focus on remittance corridors allowing migrant workers from all over the world to send money home. Some like Western Union and Moneygram operate across the globe while others specialise and serve a niche area or community. You can find them in your local high street or in any main road in your town.
Online Money Transfer Companies
But thanks to the internet online money transfer providers are today allowing users to make international transfers at next to nothing costs and still managing to make a profit.
They have different ways of doing this. Some providers have a mid market rate which they use to decrease costs for users. Others match those wanting to exchange the same sets of currency which also helps in limiting costs related to currency conversion. In addition to this transfer charges are as little as 1 dollar – some wave the fee altogether.
They are regulated by financial authorities of their country of origin and have secure methods of sending and receiving monies using the latest in financial technology. Some take two to three days to receive funds but the number of providers promising same day transfer are increasing. Lastly sending money online has revolutionized the money transfer market as customers are are finding the whole process of sending through a computer or mobile phone easy and fast compared to the hassles of visiting a local branch. Some these online money transfer websites include Currency Fair and Transferwise; two relatively new online services which have been shaking up the industry.
Compare the Money Transfer Market Before Sending Money
Because of the internet the number of providers are increasing every year and providers are competing to attract customers. When somone Google about international money transfer today or anything to do with sending money the search engine gives you millions of pages listing provider after provider promising the same thing, low costs to transfer funds.
But as seen in this article not all providers are the same and it’s best to shop around a little. Not all providers send to every country, have same day transfer policies and obviously are not offering the same price for a particular transfer.
Therefore comparing the money transfer market is a smart thing to do and luckily these days comparison has come to this market, Money transfer comparison sites offer you a list of providers and list based on low exchange costs and transfer costs and provide more information about sending money online.
Send Quick Save Quick With SendThatCash
But beware not all comparison sites are created equal. SendThatCash as one of the first money transfer and foreign exchange comparison sites offers speedy searches and clear and informative results using a live interbank-exchange rate feed updating every 5 minutes. So we not only offer a comparison of the most reliable services out there but also allow you to compare their rates based on the actual interbank rate all in real time. This offers an enhanced comparison that is not only quick but also as accurate as technology allows today!