Put simply, international money transfers allow you to send money to a designated recipient whether that be friends, family or businesses overseas. It involves you sending one currency (e.g. GBP) to an intermediary transfer service which then exchanges those funds into a foreign currency (e.g. USD) to then transfer on to your recipient in another country. International payments can be initiated in person, over the phone, through a mobile app or online. The most common method for the recipient to receive the funds is directly into a bank account although certain providers also provide the facility to allow them to collect it in cash or top up a mobile wallet.
How much does international money transfer cost?
In one way or another a money transfer provider or bank will earn money on your transfer, by charging a transaction fee and/or through the exchange rate that they are offering . For transaction fees, some money transfer providers and banks either charge a flat fee per transaction or they charge a percentage of your total transaction amount. Bear in mind that ‘no fee’ does not mean that the money transfer is not costing you anything. The cost to you maybe in a less favourable foreign exchange rate. You should always compare money transfer providers before sending money abroad to ensure you have all the information you need to pick the best option for you.
Foreign exchange rates are subject to constant change. The foreign exchange rate refers to the value of one country’s currency compared to another country’s currency. The value of each currency across the world is determined by the supply and demand for it and the level of confidence markets have in them. Since these factors change in certain conditions and over time, so does the value of the currency. For example, if 10 USD exchanges for 5 GBP, it means that the pound (GBP) is stronger than the US Dollar (USD).
What is the mid-market rate?
Often when searching for foreign exchange rates online the ‘mid-market rate’ is advertised by providers as the exchange rate that a individual or business will be offered when they transact. The ‘mid-market rate’ is the mid-point between the buying and selling prices of two currencies on the global markets and is not always the rate available to consumers for money transfer services. The difference between the mid market rate and the rate offered by the transfer service is known as “the spread”. Often providers that don’t charge a transaction fee will be making money via this spread. Providers buy funds at the mid market rate and sell to consumers or businesses at a lower or less favourable rate. The difference between the two is the profit they make on the exchange. The inverse of this is certain providers do actually offer you the mid market rate, but in nearly all instances they will charge a transaction fee for their services. As a result of these differences in fee approaches, running an efficient comparison of providers to find the best option is a classic case of trying to compare apples with pears.
Xompare.com is a money transfer comparison website, using real-time data feeds, to enable consumers and businesses to save money and time by choosing the best provider to suit their needs.