An international money transfer is one of the safest ways to send funds to someone in another country but it can still feel daunting if it’s not a process you are familiar with. Here at MoneyTransfers, we want to quell remittance-related anxiety by providing a helpful guide to sending money abroad.
Before you move any money overseas, the following considerations must be made:
Other factors to consider includes where in the world are you sending the funds and how urgently is the transfer required. Generally speaking, when it comes to costs, the faster the funds clear, the greater the associated fees.
Let’s compare and contrast the cases of two separate international money transfers. First we will consider the case of Michael Smith, who recently transferred £1,000 from his UK bank account to his daughter, who is studying in the United States. Unfortunately for Michael, this international money transfer charged him a whopping £50 in transfer fees.
Compare Michael’s situation with that of Sharon Hall, who sent £1,000 from her UK bank account to her son, who is also in America, working as a camp councillor. The key difference in this case is Sharon only paid £5 in transfer fees.
How can you avoid paying excessive fees and make smarter decisions when it comes to your money transfers? Given the choice, everyone would prefer to be in Sharon’s position, who sent the same amount of money to the same country as Michael, without being stung by high transfer fees.
To better understand the different options, we must first go back to basics, starting with the mechanics of how international money transfers work.
If, like Michael or Sharon, you want to send funds to someone in a foreign country, you will be wondering what steps are involved in sending the money from A to B. Below is a basic breakdown of the money transfer process:
There are several ways to set up a money transfer, be it in person, over the phone, using a mobile app or online. Once everything is set up and in place, the transferred funds can be deposited directly into the recipient’s bank account or mobile wallet, or made available for cash pick-up at a convenient location. The delivery timeline varies from provider to provider. On average it takes one to two business days for a transfer to clear and appear in the recipient’s account, but some providers guarantee transfers that will clear in hours. However, as mentioned previously, you typically pay a premium for expedited exchanges, up to 10% in some instances.
There is another critical factor to consider when making a money transfer: the exchange rate which determines how much one country’s currency is worth in another currency. This has an impact on how much money your recipient will receive.
Further to this, the foreign exchange market is notoriously volatile. So, when it comes to securing the optimal exchange rate for your international money transfer, timing is everything.
One way to achieve this is to ensure your provider is trading at the current mid-market rate, also known as the median rate. The mid-market rate is the midpoint between the bid (demand) and the ask (supply) prices for a currency on the global market.
As with most financial exchanges, the devil is in the details. Specifically, the finer details, as this is often where the difference can add up and leave you paying more than necessary for a money transfer.
Think of the costs associated with your money transfer as an iceberg. The visible section is the upfront transaction – or service fee that most providers charge to transfer funds. Transaction fees can vary widely depending on the provider and the currencies you’re exchanging. They generally take the form of a flat fee per transaction, ranging from £5 to £40 per transaction, or as a percentage of your total transfer amount, from 1% to 5%+ depending on the amount you’re looking to transfer.
Bear in mind, a lower fee doesn’t necessarily translate to more significant savings, as it might be negated by a weak exchange rate. The same applies to providers who offer a free or zero-transfer fee.
Then come the costs you can’t see because they lie below the surface, like the mark-up that your provider covertly levies on the advertised exchange rate, hence the term “hidden fee” or “exchange rate fee”. This point brings us back to the mid-market rate. You may notice that you seldom get this rate when it comes time to execute your transfer. This is because your provider is dealing with a FOREX merchant in the destination country. They sell you the desired foreign currency, before using your payment to purchase the selected foreign currency from the receiving provider, pocketing the difference.
Manipulating the published exchange rate for profit is a common practice among some banks and independent transfer providers. And they aren’t always upfront about the added mark-up. So, if your provider offers you a “higher than mid-market” exchange rate, you could be paying a hidden exchange rate fee over and above their transaction fee, to make up their profit margin.
Completing an outgoing money transfer sometimes means your provider will need to move funds from a local bank in your home country to a bank in another country. In this instance, the local bank may levy an additional outgoing international fee on top of the transaction fee and mid-market mark-up.
Some other bank-to-bank fees include initiation fees. Your bank may charge an extra fee for transfers done in person or over the phone as opposed to online. Some banks offer lower transaction fees when you schedule recurring wire transfers as opposed to one-off transfers. The final charge you may receive is known as a tracer fee, which refers to the charge levied for setting up a trace on a previous wire transfer that hasn’t been received as expected.
When it comes to sending money abroad, not all providers are created equal, and there’s no one-size-fits-all method which can make securing the best deal time-consuming and confusing.
To help you secure a fair deal and avoid nasty surprises when conducting an international money transfer we have put together the following list of pointers:
Sending funds abroad needn’t be a stressful experience, especially not when you have MoneyTransfers.com in your corner. We make it painless to weigh up your options and choose the provider that best suits your needs.
Sending funds abroad needn’t be a stressful experience, especially when you have MoneyTransfers.com in your corner. We make it painless to weigh up your options and choose the provider that best suits your needs.
When conducting a money transfer, always remember factors like the sender country, the payee’s destination, the exchange rate, payment method and associated fees. This will help to ensure your £1,000 international transfer costs £5, like Sharon, instead of £50 like Michael. It pays to shop around.
Whether you’re looking for the fastest or cheapest way to move money around, MoneyTransfers.com will equip you with the information you need to make a decision on the best transparent and up-to-date providers.