How do international money transfers work?
Published on 2016-03-07 | 1743 Views
If you want to send money overseas, As compared to High Street Banks, foreign exchange or currency broker can be a good option. They often charge fewer fees or some time do not charge any money and usually offers a better exchange rate than a high street bank.
As an example, you want to send 10,000 pounds to Australia as a deposit on an Australian property purchase. You’ve contacted your bank but their money transfer service is expensive. You’ve also checked out a money transfer firm but, same high fees again, therefore, you better decide to use a foreign exchange brokers.
First, you have to register to set up an account with the broker online, and after authentication of the online form, you can have access to use their money transfer services, where you can check the rates to the particular country. All rates are a variable basis on the services you need.
Most of Foreign exchange brokers do not charge a fee for transfers of more than £2,000. They also generally offer better exchange rates than the high-street banks. For example, you might need £8500 to send £10,500 euros through a broker, compared to £8,450 through a bank.
The bank would also charge a fee on top of the amount, which could up to £40. In other words, you could save about £450 by choosing a currency broker.
Types of transfer
You can also benefit from exchange rate movements by using a foreign exchange broker. There are normally three types of transfer, and you can select the one that best suits to your needs and time. A transfer at the current exchange rate, sometimes called a spot deal, it is the quickest and most straightforward as you simply send the funds immediately at the today’s rate of exchange.
Put down a deposit
The exchange rate on a forward contract is calculated by adjusting the current rate for so-called “forward points”, so is not the same as the current exchange rate. Your broker should explain the terms and conditions of the contract, but it’s worth making sure you understand the cost before you go ahead.
You do not have to pay the full price of a forward contract up front, though you will normally have to put down a deposit, with the rest due on the transfer date.
A limit order is another way to play the currency markets. If you choose a limit order, you nominate your ideal exchange rate. When the rate is reached, the broker automatically buys the currency and transfers the funds. Limit orders are not normally appropriate for small amounts, and many brokers insist on a minimum of £30,000.
Security is paramount if you are sending money overseas, so you should always check that your broker is authorised by the Financial Conduct Authority. The firm must then operate within certain guidelines to safeguard consumers. However, most foreign exchange brokers are not members of the Financial Services Compensation Scheme, so you are not guaranteed to get your money back if something should go wrong.
The cost of international money transfers varies from broker to broker. Remitadvisor.com is a free independent comparison service that allows you to make quick and easily comparison of the money transfer companies, you can also found there so many deals and offers as well.Back to Remittance Guide