A Complete Guide to Money Transfer
A Complete Guide to Money Transfer
The problem is that whether it’s a one-off wire transfer or a regular occurrence, the subject of international money transfer can often seem quite daunting and complicated. You have to think about exchange rates, transfer fees, daily rate fluctuations and above all else, exactly how you’re going to carry out the money transfer. These days, there’s a lot of competition in the international money transfer industry, which means there’s a lot of different companies to choose from. The problem is that exchange rates and transfer fees fluctuate greatly from company to company. This means that if you don’t do your homework, you could end up losing a hefty chunk of money in hidden fees and charges when carrying out your money transfer. The aim of this guide is to discuss the options available to you, help you to make the right decision and also, to demystify some of the daunting criteria such as exchange rates and transfer fees related to international money transfer.
DEMYSTIFYING INTERNATIONAL MONEY TRANSFER CHARGES
When you’re making an international wire transfer, the charges generally fall into two categories: the transfer fee and the exchange rate. Here’s what they both mean in plain English:
Transfer Fee: The fee that banks and money transfer specialists charge you for carrying out your transaction. This is typically a set fee rather than a percentage. Some companies and banks will offer a “fee free” service but beware; there is usually a catch in the form of a poor exchange rate (see point below).
Exchange Rate: The rate at which your currency will be exchanged for another currently. For example, if you were transferring £100 from the UK to the U.S. at an exchange rate of $1.60/£1, you’d end up with $160 (minus any transfer fees).
Ultimately, it’s all about how many pounds/dollars/euros etc. you’ll be left with once your transfer has been carried out.
LOOKING OUT FOR HIDDEN CHARGES AND FEES
While the transfer fee is typically quite straightforward and easily calculated, the exchange rate is often where banks and money transfer specialists place their hidden fees as they know people typically only check the transfer fee, and not the exact exchange rate they’re paying. Many banks and companies aren’t upfront about their exchange rate and often; they’ll inflate the current exchange rate between two currencies in order to make an additional profit. This can often leave you with a lot less money than you expected after the transfer has been carried out. Make sure you know the exchange rate at which your money transfer will be carried out before you go ahead with the transfer. You should also compare it to other companies (ideally using a transfer comparison tool) to make sure you’re getting the best deal.
EXCHANGE RATE FLUCTUATIONS (THE OFTEN UNREALISED HIDDEN FEE)
It’s important to note that currencies are traded (much like shares on a stock market) and therefore, exchange rates fluctuate on a minute-by-minute basis. This means that the exchange rate you’re offered on one day might be completely different from the rate you’re offered the day after and therefore, you could end up paying more depending on when you carry out your transfer. For example, let’s take a look at the GBP (British Pound) to USD (US Dollar) exchange rate over the last year.
You can see that there’s quite a lot of variation. If, for example, you exchanged £1000 for US Dollars on July 1st, 2014, you’d have been left with $1,714.94 (minus any transfer fees). If, on the other hand, you exchanged £1000 for US Dollars on December 1st, 2014, you’d have been left with $1,561.59 (minus any transfer fees). That’s a difference of $153.35 in just five months. What’s more, some currencies are more volatile than others. Take USD (US Dollars) to ZAR (South African Rand) for example.
Over the course of just one month, the currency has fluctuated greatly. If you exchanged 11,000 ZAR to US Dollars on November 21st, 2014, you’d be left with approximately $1,006.80 (minus any transfer fees). However, just a couple of weeks later on December 8th, 2014, the same amount would get you only $951.77 (minus any transfer fees). That’s a difference of around 5%. You can see how this could translate to larger sums of money. An international money transfer of 1,110,000 ZAR would you get approximately $100,680 on November 21st 2014 whereas on December 8th 2014, you’d only receive approximately $95,177. This is a difference of over $5,500 in just 17 days. If you have some flexibility as to when you transfer your money, keeping an eye on exchange rates between your two desired currencies could help you to save more money when transferring.
WHAT ARE YOUR OPTIONS FOR INTERNATIONAL MONEY TRANSFERS
Typically, you have two options when you’re looking to send money abroad via wire transfer: you can use a high-street bank or you can opt for one of the many companies specialising in international money transfer (e.g. Western Union, Azimo etc.). More often than not, using a specialist company will be cheaper than using your high street bank. The reason being that high street banks usually only set their exchange rates a couple of times per day. This means that these rates are usually inflated, as they have to set them high in order to account for currency volatility during the days trading.
Most specialist companies such as Western Union will offer live exchange rates that fluctuate as trading occurs, therefore offering a less inflated rate. Specialist companies typically offer a quicker service too, transferring your funds either the same day or within 1 – 2 days (depending on the service and company used). We recommend comparing specialist companies to see which offers the best option for your particular money transfer. You can do this manually or alternatively, use our free comparison tool to find the best priced transfer for you.