If you have ever exchanged one kind of money for another, you already know about the mid market rate. Although most retail money exchanges only change their rates once a day, those fixed rates are directly related to the mid market rate. The mid-market rate is the midpoint between the buy and sell prices of two currencies. The mid market rate is used many money transfer companies to set the price of a money transfer, but there are other things that influence how much a money transfer will cost as well.
If the description of the mid market rate seems a little bit complex, don’t worry. Basically, the mid market rate exists as a way for people and companies that deal with foreign currency exchange to have an idea of where the value of any currency pair is trading.
When you choose to use a money transfer service, there is a good chance that they will use a rate that is based on the mid market rate to determine the value of your currency against whatever currency you are buying with the transfer.
Whenever you transfer money to another country, you are selling your currency and buying the currency of another country. For example, if you want to send money from the UK to the EU, you will have to sell British Pounds, and buy Euros.
In most cases, the bank or financial services will use hidden mark ups and apply an exchange rate to your international transaction, and that rate will determine how much of the foreign currency you will receive after the money is transferred.
A few decades ago, there weren’t many options for people who wanted to transfer money abroad. When a person wanted to transfer money, there was Western Union, as well as a retail bank transfer. The pricing for these services was opaque, and very expensive by today’s standards.
Now, consumers have access to money transfer services that will use the mid market rate as the base for the exchange rate and will process a transaction quickly. A SWIFT transfer (bank to bank) can take days to be approved, but some modern money transfer platforms can clear a transaction the same day.
With the gains in speed that modern money transfer platforms create, there has also been a substantial drop in transaction fees. Many money transfer platforms will offer their clients the mid market rate, plus a small fee for the service.
There is a lot more competition for international money transfers today, which means that you can get a much better deal when you need to move money to another country. It is important to understand how international money transfer fees work, so you can get the best deal in the market.
With the rise in options for international money transfers, there has also come a lot of complex marketing that tries to entice you. When you start looking for an international money transfer platform, make sure that you are able to see all the fees that will apply to the transfer.
Some platforms will set the exchange rate every day, while others will charge you mid market rate, plus a fee for its services. Regardless of the method used to determine the exchange rate, all the fees, as well as the total amount the recipient will receive should be displayed plainly when you agree to the transfer.
Furthermore, some platforms will tell you that using the mid market rate is the best way to transfer money, but this may or may not be true, as the mid market rate changes all the time. If you are using a service that fixes the rate once a day, and that rate is lower than the mid market rate, then you may be getting a better deal if you use the fixed daily rate.
Be aware that many money transfer services will add on charges to a transfer, even if they are making money on the exchange rate. It is your job to understand the cost structure of a transfer and get the best rate you can for your hard-earned cash.
Understanding what the mid market rate is will help you get more for your money when you make an international money transfer, but there are other things to think about as well. Some banks will charge a fee to receive money from another country, even if it is being sent in the bank’s native currency.
Another thing to consider is how often you will be making international transfers, as there are money transfer platforms that will allow you to lock-in a given exchange rate on a currency pair. Creating an international money transfer strategy should include some analysis of the frequency of your transfers, so you can best plan for your ongoing financial needs.
The platforms that can move money internationally are innovating all the time, and you should probably familiarize yourself with some of the better platforms in the industry. As increasing competition enters the marketplace, the best option you have for making international transfers could shift from one platform to another.