If you own property overseas, work abroad or make regular international money transfer for a pension or a foreign mortgage, then it pays to know about overseas money transfers. You need to understand how to get the most out of them, because if you fail to do your homework, you could end up needlessly wasting large amounts of money through hidden fees and poor exchange rates.
Beware of Hidden Charges
You might think that currency fluctuation is only a problem for foreign exchange traders, but you would be wrong. In our modern society, the variable value of the pound against the dollar, euro and other denominations is an issue affecting us all. An increase in global trade, leading to an increased volume of international money transfer, means that understanding the right way to transfer your money can make a huge difference to your finances.
Most people turn to their high street bank as their first port of call when making international money transfer, assuming that it’s their only or best option. However, irrespective of whether you’re based in the UK or overseas, and what type of bank account you have set up, the majority of banks offer shockingly poor exchange rates and attach a variety of subtly hidden charges to your transfer. They know that most of their customers will not take the time to check rates and see how much they’re paying, and they take advantage of this naivety or laziness to cash in on your oversight.
It doesn’t have to be this way; it pays to shop around when you’re making international payments. The costs your bank charges fall into two simple categories: fees and exchange rate. These areas should be your main focus when shopping around. Firstly, look out for fees. Key charges include transfer charges and overseas bank receiving fees. Secondly, consider exchange rates. Banks which claim to be ‘commission free’ often load the exchange rate. Sometimes this information can be hard to get hold of, as certain providers don’t make the information public.
To get the most out of your money, ask yourself one simple question: how much of the foreign currency will you receive for your money after paying the charges attached to the transfer?
How Much Can You Save Using a Currency Broker Rather than a Bank?
The average saving is estimated as two to four per cent. This may not sound like a lot, but it equates to saving £4000 through exchange rate alone on a £100,000 transfer.
It’s also worth bearing in mind that banks set their exchange once or twice a day, and to make sure that they stay profitable spreads will be increased to cover any intraday exchange rate volatility. Brokers, on the other hand, can give their clients access to live rates, thus saving you money.
How Quick is it to Use a Currency Specialist?
Using a currency company like Currencies Direct means that you avoid international banking fees, so your money can get to its destination much faster. Transfers are generally free, and arrive in the recipient’s bank account one to two working days after they’re sent.
The Importance of Timing
The timing of your transaction can be incredibly important, particularly if you’re sending large amounts of money. The majority of people pay little attention to the exchange rate, leaving their transfer to the last minute and assuming that they’ll find a good rate. Instead, you need to maximise the timing of your transaction, minimising the risk of a poor exchange rate which decreases the value of your transfer. The higher the amount you’re transferring, the more important it is to transfer it at the optimum time. A limit order could be your new best friend. With a limit order, you specify your ideal exchange rate to the broker. When that target rate is triggered, the dealer has the power to transact on your behalf. This ensures that you get the best possible exchange rate when you have to make an overseas payment.
Why not take a look at MoneySuperMarket’s free independent comparison services to do some research of your own? Choose wisely and make the most of your money.