A Guide to Making Cost-Effective Overseas Money Transfers

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I’m really pleased to bring you a guest post today from Jon at iCompareFX.

Jon’s job involves taking a close look at how the world’s leading overseas money transfer companies function. Transferring money abroad is something that I know absolutely nothing about but know is super popular in the UK. So, over to Jon….

Data released by the Pew Research Centre shows that over £21 billion was sent from the United Kingdom to other countries as remittances in 2017. While a significant number of people who live in the UK send money overseas, not everyone knows how to go about the process in a cost-effective way. Besides, individual requirements can also affect the choice of service providers one gets. Fortunately, paying attention to a few simple aspects gives you easy means to select an overseas money transfer company that works well for you

Exchange Rate and Fees

The exchange rate that applies on your transfer and the fees you need to pay have a direct bearing on the cost of your transfer. For instance, a seemingly great exchange rate can easily be offset by a steep fee. Most banks tend to lose out to specialist overseas money transfer companies in this aspect because of the exchange rates they provide and the fees they charge.

The corresponding table gives you an indication of how much money you may save if you compare your options well.

Choosing the Right Transfer Method

The transfer method you select may have an effect on how much you need to pay as fees. Sending money to a cash pickup location is typically more expensive that transferring funds into a recipient’s bank account. However, transfers to physical locations tend to process almost immediately. Some of the leading money transfer companies that facilitate cash transfers include Ria, WorldRemit, Western Union, and MoneyGram.

If there is no urgency, sending funds directly into the recipient’s bank account might help you save some money. In this case, some of the top alternatives include XE Money Transfer, TransferWise, OFX, WorldFirst, and InstaReM.

If you're looking to make cost effective overseas transfers, maybe we can help!

How Do You Plan to Pay?

Another aspect that affects the cost of your transfer is the payment method. Paying through bank account transfers is typically the most cost-effective, followed by paying using debit cards. Making a credit card payment tends to come with the highest fees. Other payment methods you might get to choose from, depending on the company you select and your country of residence, include Google Pay, Apple Pay, ACH, SOFORT, BACS, CHAPS, FPX, and POLi. With these payment methods, you need to check how much you need to pay as fees.

Think About Different Hedging Alternatives

If you want to make the most of your money and are in no particular hurry to carry out your transfer, you may benefit by looking at different forex hedging tools. Your basic options include:

  • Forward contracts. With a forward contract, you can lock-in existing exchange rates for up to two years, depending on the overseas money transfer company you select.
  • Limit orders. With limit orders, you get to target better than existing rates. Once the rate gets to the level you select, your service provider processes your transfer automatically.
  • Stop loss order. If you’re worried about a negative turn in the market, you can go the stop loss order way. You start by setting a worst-case rate. When the rate drops to that level, your service provider carries out your transfer.

Using Promotional Offers

Several overseas money transfer companies provide promotional offers, especially for new customers. These can range from one or more fee-free transfers to preferential rates for the first few transfers. Some companies give their customers the ability to earn reward points when they send money overseas, which they may use toward subsequent transfers. Some even offer cash rewards through referral programs.

Conclusion

Saving money when you wish to carry out an overseas money transfer is possible. What you need to do is compare your options well across parameters such as exchange rates, fees, payment methods, transfer methods, and hedging alternatives. If you can make use of promotional offers, there’s nothing like it.

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