Everything expats should know about international currency transfers

Contributed by TorFX, 09 June, 2017

Most expats will at some point need to transfer money across to their foreign bank account, or send funds back home. Doing this means getting to grips with exchange rates and international currency transfers. This can seem daunting at first, given the complexity of the foreign exchange market, but once you understand how it works and how to use the unpredictability of exchange rates to your advantage, you'll realise it's much more straightforward to transfer money overseas than you might have thought.

Here's everything expats should know about international currency transfers.

Why might expats need currency transfer?

There are many different reasons why you might want to make overseas money transfers, whether regularly or on a one-off basis.

You may have income that you want to get hold of, such as the proceeds from renting out or selling your old home, transferring Sterling-based pension payments, or tax rebates.

Perhaps you have kept your savings at home rather than bother with the hassle of bringing them overseas, but are now wanting to get hold of some or all of the funds in your new currency.

You may want to get a mortgage for a foreign property purchase from a bank back home, to benefit from your strong domestic credit score.

You may also need to send money back home to yourself, friends or family. This may be for bills, fees, gifts, or other financial arrangements.

How international currency transfer works

In order to send money to another country, your funds first have to be converted into the local currency at the going market exchange rate. This rate represents the difference in value between the two currencies.

Each currency has its own code, such as GBP (Pound Sterling), EUR (Euro) and USD (US Dollar). An exchange rate is shows you how many of the currency you want you can buy with one unit of the currency you have. So a GBP EUR exchange rate of 1.15 shows that for every Pound you convert, you will receive one Euro and fifteen cents.

Common pitfalls of international currency transfer

When making an international money transfer, you are exposing yourself to the volatility of the currency markets. Exchange rates change every second and can often leap by 1-2% in a single day The difference in the going market rate for a currency pairing over the course of a few weeks can make a difference of thousands on large transfers.

The main issue is poor timing. Get it right and you can make your money go much further; transfer when the markets are weak and your overseas budget will shrink and your current funds won't stretch so far.

An additional problem is transferring money in the wrong way. Exchanging instantly at the going market rate is known as a 'spot transfer', but there are simple-to-set-up tools you can use to wait for better rates, fix a strong rate in place for future use, or protect yourself should the market weaken further.

One of the most common pitfalls people make is choosing to use their high street bank to make their money transfers for them. They handle all your other financial needs, after all, so why not currency exchange?

The next section looks at why this is often a costly and inconvenient choice.

Why use a specialist currency broker?

Currency brokers are firms that deal solely with international money transfers. They have the time and resources to get you a great deal and simplify the process of sending money overseas.

Currency providers like banks and brokers buy their currency from the private interbank market, like retailers buying goods wholesale. They then sell it on at a marginally higher price. Because currency brokers process huge sums of money every day, they can usually afford to mark up the currency they buy and sell less than a high street bank would have to.

This means you can get competitive exchange rates by contacting a currency broker, which gets you more for your money. The leading brokers will assign you a dedicated Account Manager to oversee your transfers, who provides guidance and regular insight into the markets to help you decide whether it is currently a good time to send money abroad.

Brokers can also offer some of those advanced tools for transferring money we mentioned earlier. One such tool is a 'forward contract'. If you don't need to transfer your money yet, but the market is in a strong position, a forward contract allows you to save that exchange rate and use it to buy currency at any point up to two years into the future. This helps you to budget and can also save you a lot of money.

This is just one of the options available to you. Your Account Manager will happily talk you through all the choices you have and help you decide which one best suits your current needs.

If you want to save time and money on your overseas currency transfers, open a free, no-obligation account with leading currency broker TorFX here and ask your Account Manager how they can help you.

Tags: currency | budget | Currency | retail | fees | tax |



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