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How to find the best money transfer rates

What exactly constitutes transfer charges and how can you get the best deal? In this guide we’ll look at the types of money transfer rates, what they add up to, the factors that determine the rate you pay, other additional fees, and useful tips for finding the best rate when sending money abroad.

Updated: 01/05/2021
Read time: 12 minutes
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Digital payment platforms driving down money transfer rates

In recent years digital payment solutions have revolutionised the money transfer space, giving a new breadth of choice to an industry which was previously dominated by banks and other large institutions. These services have created competition that has significantly reduced the cost of international money transfers.

This is especially good news for the millions of people sending money home as remittance payments each year. According to estimates by the International Labor Organization (ILO), the number of migrant workers as of 2017 stood at 164 million. These are people who’ve left their home countries in search of better living or lucrative career opportunities abroad. 

The World Bank estimates that in 2019, global remittances totalled US$707 billion, with remittances to low and middle-income countries accounting for 78% of the total. Many people sending money home to families in developing countries were charged rates up to 7% of the transfer amount if they choose the wrong service. Banks typically charge high fees on top of exchange rate margins ranging between 4% and 5%.

But what do terms like ‘exchange rate margin’ and ‘transfer fee’ mean, and how do they impact your money transfer? We will take you through everything you need to know about money transfer rates.

What’s included in the money transfer rate?

When making international transfers, whether personal or business-related, you’ll incur several charges. First, your funds will have to be converted from your home currency to the local currency of the destination country. Depending on the provider’s policy, such exchanges can be done at the mid-market rate (interbank rate) or at a rate that includes a margin above the mid-market rate.

You’ll also usually be charged transfer fees depending on the amount you are sending and how you pay for your transfer; the level of these fees vary between providers and different transfer corridors.

What’s the difference between exchange rate margins and a transfer fee?

An exchange rate margin refers to the percentage difference between the mid-market rate for any pair of currencies as quoted on sites such as Reuters and the rate your provider offers you for currency conversions.

Transfer fees, on the other hand, refer to the other charges you incur to process your transfer. They include payment method fees and the provider’s commission, which is often a flat fee. If you choose to pay for your transfer using a credit or debit card the fee will typically be higher than when paying using a bank transfer or direct debit.

How much do money transfer rates usually add up to?

There is no one fixed figure for a money transfer rate, and so it’s hard to give an accurate indication of how much a ‘typical’ transfer will cost. Rates differ based on several factors such as:

  • The money transfer provider you choose: Transfer providers have different fee and exchange rate structures. Some may process your transfer at mid-market rates while others choose not to charge transfer fees.
  • The transfer origin and destination: Popular money transfer routes include United States to United Kingdom, United Kingdom to France, United Kingdom to Spain, United States to Australia and these are usually cheaper to transfer money between.
  • The currencies involved: Some countries can receive money in more than one currency. For instance, when sending money to South Africa, it can be received in dollars or rand. Currencies such as the Euro, United States Dollar, Great British Pound, Canadian Dollar, and Swiss Franc are classified as major currencies. They are cheaper to trade in than less commonly used currencies such as Malaysian Ringgit, Mongolian Tugrik, and Malawi Kwacha.
  • How you pay for your transfer: If you pay using a debit or credit card, you’ll pay anything from US$9 in transfer fees, while for bank transfers you can pay US$5 or lower.

According to data from FXC Intelligence gathered by The Economist magazine, digital remittance providers generally keep their transfer rates below 2% of the amount sent when transfer fees and exchange rate margins are taken into account. 

How do I find the best money transfer rate?

The rates you get are as good as the international money transfer providers you choose. This means to get a competitive money transfer rate, you need to conduct some analysis using money transfer comparisons tools. You’ll need to find a transfer service which offers a winning combination of low fees and favourable exchange rate margins for the currencies you’re transferring from and to.

You’ll also need to consider how much money you are sending; the higher the value of your transfer, the more important the exchange rate margin becomes. Imagine a provider charges a £15 flat fee for transfers, with a 1% exchange rate margin. If you’re only transferring £100, it’s the flat fee that is particularly unappealing as it will cost you 15% of your amount. However, if you are sending £10,000 then the fee is negligible compared to the exchange rate, as the 1% margin will eat up £100 of your transfer amount.

The MoneyTransfers comparison tool is designed to give you a list of recommended providers based on the amount you wish to transfer, how you want your recipient to get the money, and how fast they need it. It takes only a couple of minutes to get a breakdown of which providers are best for your needs. 

Are there any other fees to consider?

The money transfer process may appear straightforward, but you could end up paying more if you don’t factor in all the fees charged by the provider. The exchange rate margin, the payment method fees, and the provider’s commission are the primary fees, but they are not the only charges involved. Often there are additional fees that are outside the control of a money transfer service. For this reason, it is sensible to check with your bank before sending any money.

It is important to note that the fees vary from one provider to another. Here is a list of other common fees to familiarise yourself with:

  • Amendment fee: If you confirm the details of your transfer and later realise there is something you need to change; you could be hit by an amendment fee.
  • Cancellation fee: If for whatever reason you need to cancel your transfer, you may be charged cancellation fees. Normally, providers allow transfer cancellations if the money hasn’t been paid out. Receiving banks may also charge cancellation fees.
  • Receiving bank fee: This is a fee charged to receive your transfer at the destination. Depending on the arrangement, you may have to pay the fees upfront or they may be deducted from the amount to be received by the beneficiary.
  • Investigation fee: If you make enquiries about your order, you may be charged a fee for that. For instance, Foremost Currency Group charges you £10 for requesting proof of payment via post, fax or email. Requests via text are charged at £2.50.
  • Correspondent fee: Your transfer may be processed through correspondent or intermediary banks. These institutions charge fees for acting as agents or for playing the middle-man role.
  • Cash advance fee: If sending money with a credit card, your card issuer will often charge high cash advance fees on top of the other transfer fees you’re paying.

MoneyTransfers.com’s tips and tricks for getting the best money transfer rate

Rapidly advancing technologies have helped money transfer service providers offer fast, efficient and best rates to their customers. However, getting competitive rates on your transfer requires that you keep a few factors in mind. Here are some tips and tricks we’ve gathered based on our experience.

1. Know the interbank rate for your currency pair

The interbank rate or mid-market rate is the midpoint exchange rate between demand and supply of your currency pair in the global currency markets. Providers usually add a margin on top of this rate. Sites such as xe.com and Reuters can help you get a baseline from which you can compare and evaluate the various rates offered by providers and ensure you’re getting a good deal.

2. Request and compare quotes from various providers

You can use a money transfer comparison tool to get a list of recommended providers on your transfer route. Then request for quotes from each of these providers to ascertain the best rates you can get.

3. Consider your transfer needs and options

Do you send regular payments or have planned major transfers in the future? You can get the best rates using options such as regular transfer facilities and forward contracts. If your provider has products such as limit loss contracts, they can also be a great way to maximise your money transfer rate by trading only when certain conditions are met, such as when the exchange rate between two currencies falls to a certain level.

4. Get a multi-currency bank account or method of payment

If you are making regular trades in popular currencies such as the Euro, US Dollar, the British Pound, Australian Dollar or Japanese Yen, you should get a multi currency account or card. Multi currency accounts are designed to hold funds in various currencies and offer low fees and best exchange rates when using them to pay for your transfer.

5. Consider the size of your transfer

Money transfer providers have different business models. Some encourage large transfers by charging zero transfer fees beyond certain amounts while others specialise on small transfers and remittance payments. Getting the appropriate provider for your transfer size can save you a substantial amount of money in rates and fees.

6. Look at the transfer payment options 

How you pay for your transfer and the payout method you choose affects the fees and rates you pay. If your transfer is not urgent, you can choose payment methods such as bank transfers which are relatively cheaper but take slightly longer. 

Where to find the best exchange rates

Are you planning to send money and looking for the best exchange rates? Well, exchange bureaus, banks and cash-based money transfer services may not give you the answer. Digital money transfer service providers are the best bet, but there is a variety of these and you need to drill down to the specifics to get the best match.

To start you off and give you an indication of the money transfer rates you’re likely to find, we’ve sampled providers with the best money transfer rates when sending small, medium and large amounts.

Companies with the best money transfer rates for small amounts (less than £1,000)

Here are the best providers for amounts less than £1,000, analysed per transfer corridor. Let’s say you want to send £500 to pay some bills in Spain, Australia, or the United States.

UK-Spain

1. Western Union: If you send £500 using bank transfer direct to the recipient’s bank account, the beneficiary gets €566.05. The fees charged are £0 and the exchange rate margin is 0.32%.

2. TransferWise: Sending £500 will cost you £2.10 if paying using bank transfer and 0% in exchange rate margin. The recipient gets €565.35.

3. WorldRemit: The provider will charge you a fee of £2.99 and an exchange rate margin of 1.21%. The recipient gets €561.05.

UK-Australia

1. WorldRemit: The provider charges a margin of 0.36% and a £2.99 transfer fee with the beneficiary getting AU$1,019.69.

2. TransferWise: You’ll be charged £2.11 if you pay via bank transfer and 0% exchange rate margin when you send £500. Your recipient will get AU$1,019.25.

3. Western Union: If you send £500, pay for it using bank transfer and have it deposited directly into the recipient’s bank account, you’ll be charged £0 transfer fee and a margin of 0.78%. The beneficiary will get AU$1,015.38.

UK-US

1. TransferWise: Transferring £500 will see the recipient get $610.24. The exchange rate margin is 0% and the fees are £2.60 using bank transfer.

2. Azimo: When you transfer £500, the recipient gets $608.21. The fees charged are £1.99 and a 0.47% exchange rate margin. However, the first transfer is fee-free giving your recipient US $610.64.

3. Western Union: If you send £500, the beneficiary will get $606.18. The fees are £0 if you pay using a bank transfer and choose a bank deposit as the payout method. The exchange rate margin is 1.19%.

Companies with the best money transfer rates for medium amounts (£1,000 – £10,000)

Let us assume you are sending £5,000. The following are the best providers on the transfer corridors highlighted below:

UK-Spain

1. Western Union: If you pay for your transfer using bank transfer and choose bank deposit as the payout method, the recipient will get €5,669.44. The transfer fee is £0, and the margin is 0.17%.

2. TransferWise: You’ll pay £18.69 in fees and a margin of 0%. Your recipient will get €5,656.08.

3. WorldFirst: The transfer fee varies depending on the amount that you transfer annually. If you transfer between £100,000 and £500,000 annually you will be charged 0.5%. If you transfer between £500,000 and £5 million annually, you’ll be charged 0.25% and for those who transfer above £5 million, the fee is 0.15%. The margins for the three transfer categories are 0.72%, 0.47%, 0.38% respectively. This gives the recipient €5,638.17, €5,652.23, or €5,657.88 in that order.

UK-Australia

1. Western Union: If you pay using a bank transfer and choose bank deposit as the payout method, Western Union will deposit AU$10,199.88. The fee charged will be £0 and the exchange rate margin is 0.32%.

2. TransferWise: The provider charged a fee of £18.70 and 0% exchange rate margin. The beneficiary gets AU$10,197.42.

3. WorldFirst: For the three transfer bands of £100,000 – £500,000, £500,000 -£5 million and above £5 million, the fees remain the same at 0.5%, 0.25% and 0.15%. However, the margins change slightly to 0.71%, 0.46%, and 0.36%. The beneficiary gets AU$10,160.44, AU$10,185.97, or AU$10,196.18 respectively.

UK-US

1. TransferWise: The provider charged a 0% exchange rate margin and £19.19 in fees giving the beneficiary $6,110.71.

2. WorldFirst: In the three transfer bands£100,000 – £500,000, £500,000 -£5 million and above £5 million, the margins are 0.65%, 0.40%, and 0.30%. The fees remain 0.5%, 0.25% and 0.15% giving the recipient $6,095.37, $6,110.69, or $6,116.81

3. TorFX: Together with Currencies Direct, TorFX doesn’t charge any fees on transfers. Their margin is 0.86%. They deliver a similar amount to the recipient- US$ 6,082.20.

Companies with the best money transfer rates for large amounts (£10,000+)

Assume you are transferring £500,000 to buy a holiday house in any of the following destinations. These are the providers to look out for.

UK-Spain

1. TransferWise: At 0% transfer margin, the provider deposits €566,088.14 into the recipient’s account. The fee it charges is £1,445.99 or 0.29%. 

2. TorFX: The provider charges £0 and a margin of 0.50%. The recipient gets €565,817.55

3. Currencies Direct: Much like TorFX, charges a margin of 0.50% and £0. The beneficiary gets €565,817.55.

UK-Australia

1. TransferWise: The provider charges 0% transfer margin and deposits AU$1,020,609.84 into the recipient’s account. The fee for the transaction is £1,446 or 0.29%. 

2. TorFX: The fee charged is £0 and a margin of 0.35%. Your beneficiary gets AU$1,019,745.21.

3. Currencies Direct: This provider equals TorFX with a margin of 0.35% and £0, the recipient gets AU$1,019,745.21.

UK-US

1. TransferWise: The recipient gets $611,650.39, thanks to the mid-market rate TransferWise uses and 0.29% of fees amounting to £1,446.48.

2. TorFX: This provider comes out strong with zero fees and a 0.31% margin. The beneficiary gets US$611,592.19. 

3. Currencies Direct: Also with £0 fees and 0.31% margin, Currencies Direct is a top provider on this route. The recipient gets US$611,592.19.

Summary

Making cross-border transfers is now much easier and cheaper with digital remittance and money transfer providers. However, for you to get the best money transfer deal, you’ve got to understand the makeup of the money transfer rate being offered and the factors that affect its movement.

Using our regularly updated money transfer comparison tool, you can quickly get to know the savings you can make against high street banks, alternative providers, and the amount your recipient will get. 

Work with you transfer size and destination to find the best provider. Some providers are best for transfers under £1,000, others suitable for transfers ranging from £1,000-£10,000 and still other providers score well for transfers above £10,000. As we have shown, the best provider will depend not only on the amount being transferred but also on where you’re sending funds and the currencies involved.  The details of each individual transfer are unique, and by comparing your options there’s always a bargain to be found out there.

Read our simple guide on the cheapest ways to send money abroad to get more details and tips!

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