Currency advice for expats
This article was written exclusively for Expat Network by MoneyTransferComparison.com
The difference between banks and money transfer companies
The first thing you need to consider upon an overseas money transfer is stepping away from your bank and using a currency provider. Currency providers are, in a nutshell, brokers of foreign currency. They buy foreign currency in very large volumes, and as such they are able to afford to sell it to private or corporate clients for excellent rates. Banks could have done this too because they have unlimited access to foreign currencies, but they simply won’t try to compete in this field.
As an added value, currency providers, or money transfer companies, give personal guidance to their clients. Personal guidance includes suggestions on the right timing of each transaction, as well as the best course to avoid or minimize intermediary bank fees. As part of a client’s personal guidance he is also offered an array of hedging tools which are normally unavailable through the bank with the exception of large corporations. These hedging tools such as Forward Contracts enable you to lock down today’s rate for a future transaction and mitigate the inherent volatility of currencies.
How to choose the right provider for overseas transfers?
As soon as expats are introduced to the idea of overseas transfers through commercial companies rather than banks, they are normally thrilled with the prospect of saving a significant percentage of their hard-earned money, but they are concerned with the safety aspects. “I would rather stay safe than try to slash some fees and, eventually, be sorry”, they say.
The thing is that if you choose the right money transfer companies, the chances of being sorry are extremely small. It would be ludicrous to claim that financial providers are regulated in as stringent a manner as banks, they’re not; however, the top services are fully regulated by the British FCA, which makes absolutely sure clients’ funds are separated from the company’s current account which means that if a money transfer firm goes to bankruptcy, these segregated bank accounts return to their rightful owner – the clients who deposited the money there. Additionally, the best known companies have been operating for 10 to 20 years by now (with Moneycorp in business since 1970). They are transferring billions overseas each year. They employ hundreds of professionals and have thousands of client reviews about them online. It doesn’t go out to say that big firms can’t crash, they most certainly can, but if you are choosing the right provider who has been demonstrating stability in business for dozens of years, your chances of disappointment are low.
What can I actually save?
Many expats are knee-deep with hundreds of things they need to work out as a part of their move abroad, which is understandable, and they think overseas money transfer aren’t necessarily going to make a significant difference in their personal finances. I believe they could be very wrong on this.
Even transferring your salary overseas or paying a mortgage overseas means that you’ll be paying on average something like $50 each month just in transaction fees. That’s $600 a year or $6,000 in ten years. If you were to move 200,000 dollars overseas to buy property, you’ are likely to pay $5,000 just in fees on that single transfer, and you could be paying as much as $10,000 if you’re moving your dollars somewhere exotic overseas like South America or South East Asia. That’s a lot of money that could be spared for better purposes. Money transfer companies won’t allow you to use their services for free, of course, but you will get much better rates than you do with banks unless you’ve been lucky to get great rates from your bank.