For anyone new to sending money abroad this is how you do it. It is a very simple process.
There are several providers you can use to send money abroad; banks, Western Union, currency brokers.
The amount you wish to send, how quickly you wish to send it, and the destination will determine which of these providers you will use.
Western Union are often used for sending money abroad where the receiving party does not have a bank account as they have an extensive network of offices where they will pay out cash on proof of identity on the next day after receiving your money. This service is expensive, costing on average 18% of the money transferred.
If you are transferring money into a foreign bank account, better to use the banks or a currency broker to do this as they charge much lower commission rates.
Traditionally banks were used to transfer currency but in the 1980s currency brokerage started up offering a similar service for reduced commission fees. A broker is just someone who offers a deal, like an insurance broker.
All currency deals done with either a bank or a currency broker HAVE to be agreed by telephone as the conversation will be recorded. This is a legal requirement on the company as in the event of any dispute they have to have undeniable proof of what deal was agreed.
So what level of commission will I pay a bank or a broker?
You will never know! Their fees are hidden in the exchange rates they will quote to you. This can make it difficult to compare providers, so you must focus on how much actual foreign cash you will have when the deal is done. In general brokers will offer much better exchange rates than banks.
How to get the Best Exchange Rate
So how do you ensure that you are getting the best exchange rate possible? i.e. paying the lowest fees possible?
Firstly, ask your broker to quote you for a sample rate in advance of the day you want to do the deal. He should be willing to do this, and you can then compare a couple of providers.
Be careful as many will offer an automatic internet currency transfer option on their website but this will ALWAYS come with a poorer exchange rate than if you call them directly. They cannot adjust the computer system for you, but they can adjust the exchange rate when you speak to them in person. So ALWAYS call a broker to do a deal.
Then you can use this information to try to negotiate a better deal by saying you have had an offer of a better deal with another broker. It won’t always work, but there is no harm in trying.
Getting to know one or two brokers well is much better than trying a different broker every time you want to send money abroad as they will do their best to keep you as a customer.
Secondly, when doing the deal ‘phone your preferred broker and ask his exchange rate for the deal. Then quickly, call a second broker and check their rate. Do the deal with whichever broker gives you the best rate. You must do this quickly as the market price will be fluctuating as you talk to both of them.
This sort of deal is called a spot deal, done on the spot, there and then. Click here for a post explaining about fixed foreign exchange deals .
Over time you may come to trust one dealer with your deals exclusively, but it does no harm to check them out now and again against another broker.
The brokers are wheeler-dealers and will not be offended by you doing this… they are doing it themselves all the time to get the best deals they can for you.
So that leads us into my next blog.. the 5 steps to send money abroad using a broker
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- The 5 Simple Steps to Send Money Abroad | Moving Abroad | April 28, 2012