Jordan Tilley at online money transfer specialist UKForex shares his top 5 tips on the best way to do international transfers - and how to ensure you don’t lose out:
1. Consider the real rate
The first thing to know is that the currency rate you see before you transfer may not be the rate you’ll actually get. For example, when you see a pound to Aussie dollar rate of 1.83 online or on the news, bear in mind that this could be the interbank rate – the rate the banks use to transact with one another.
With you, the banks will want to cover their costs and make a profit, so will add a margin. Instead of getting 183 Australian dollars for every £100 you send to Australia, for example, you’ll be more likely to achieve around 170 dollars.
To be sure you’re transferring at the best time, make sure the exchange rate you're quoted is the customer rate. It's easy to compare rates with sites like FXCompared.com that show daily rates and fees from different providers.
2. Beware hidden costs
The exchange rate is not all you need to consider when you make a transfer. Many financial institutions charge a fee on top, and sometimes these aren’t clearly advertised. Fees tend to vary depending on the size of the transfer and whether you do it over the internet, by phone, or in a branch, but they can be sizeable so you should compare before you transfer. If the amount you’re transferring is large enough, the fee may sometimes be reduced or waived, although banks are unlikely to waive the full fee.
Though it’s good to be aware of fees, it’s actually exchange rates that are more critical to consider when it comes to international money transfers. While a £25 fee sounds a more considerable sum than a £2.50 loss on every £100, consider this – the fee doesn’t scale but the margin does.
Once you’re transferring large amounts of money, it's the exchange rate that will hit you hardest, while the fee will seem less significant.
3. How much are you transferring?
It's generally more cost effective to transfer money in larger amounts. You can get access to better exchange rates and fees will be a proportionally lower cost, or there may even be no fees at all. But if you don’t need to transfer a large amount all at once, or believe there's a favourable exchange rate shift on the way, you can always transfer what you need now and leave the rest until the currencies tip your way.
4. Consider your options
It's likely you’ll find better value if you look for alternatives to using your bank, which will tend to offer its best rates to large corporate customers.
There are two main alternatives to using a bank – remittance providers, and international transfer specialists. Remittance providers, like Moneygram and Western Union, are good for low-value transfers, and tend to be the best choice if you're transferring from cash to cash. International money transfer specialists are better if you're transferring from one account to another. This is often a quicker service, and offers more competitive exchange rates and lower fees than remittance providers.
5. When to transfer
If you have the luxury of being able to wait, this really is worth considering. If you’ve got a stash of sterling under your bed and want to get the best rate, then by all means hang onto your sterling until it looks like a favourable rate is on its way.
But bear in mind that it may take longer than expected – or never happen – that your dream rate arrives. A few months ago, there were multiple predictions that the Australian dollar would fall well below 80 US cents by mid-2014, but at the time of writing, it’s pushing 87 cents. This just goes to show that you can never be sure how things will turn out!
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