Today, transferring money has become easier than ever – at least within your own country. Cross-border transfers, however, can come with added complexity and costs. It’s important to learn how to navigate them if you’re going to trade or invest internationally with success.
Establish the client’s preferences
Some companies have a very rigid approach to international business and like to handle all their transfers the same way. This is problematic in some situations, especially for small businesses who can face proportionally higher transfer costs. It’s important to be clear about how a transfer is going to be handled before you sign on the dotted line, because in some cases it may mean you’re better off not taking the deal at all and working with a different company. In other cases you may be able to persuade the company in question to make special arrangements for you.
Assess your options
There are three different principal ways to move money internationally:
- A bank or building society transfer – this is easy to arrange and very safe. You’ll need your IBAN and BIC to make it happen – often these are included on bank statements but in some cases you will need to ask your bank for them. The exchange rate offered can be poor, however, especially if you’re dealing in larger amounts of money, as they don’t usually offer discounts. The process is also slow – unless expedited, transfers can take up to six days to be completed.
- A forex transfer – making forex transfers generally gives you access to the best exchange rates available and it’s fairly quick – most transfers are completed within 24 hours. If you’re transferring larger amounts of money, then you may not even need to pay a fee. You will need to have an account with a broker, however, and this can take time to set up. In many cases you will have no protection if the broker becomes bankrupt, so there’s a slim but real risk that you could lose your money.
- A popular money transfer company – some well-known companies specialize in moving money internationally and can do so very quickly. They’re very easy to use but the rates they offer change continually and they often charge high fees, with complicated fee structures that can lead to you incurring hidden costs. Transfers are often uninsured and there’s usually no protection available for you if the company goes bust while it has your money.
Rates and fees
As you’ll see from the above, there are two sets of costs you need to be alert to here: rates and fees. The latter can be complicated and it’s important to be clear about them before you make a transfer. Sometimes this is easier to do by reading reviews than by reading through all the small print issued by the companies themselves. Exchange rates are much easier to understand but they fluctuate, so if you’re making a simple transfer, you could find that it costs you more at the point when it goes through than it looked as if it would at the point when you arranged it.
Hedging your transfers
One way to avoid exchange rate-related losses on international money transfers is to hedge them using forex – another reason why it can be worth setting up an account with a broker. You can do this by taking a position on the currency pair you’re dealing with that is opposite to the outcome you want – i.e. if you’re hoping that the dollar will stay high against the euro, you take a position on it falling. This means that any losses from a change in the rate are offset by the gains you make through forex. In effect, it makes the exchange rate issue neutral – you won’t gain either, but there will be no nasty surprises.
Stay clear of scams
As in every area of business, there are scammers out there looking to take advantage of the inexperienced. Be wary of dealing with companies you haven’t heard of before, check with registration bodies to make sure they’re legitimate and don’t trust anybody who comes looking for you rather than the other way around.
Ultimately, the best arrangement for you is likely to be different on different occasions. Some companies make it easy to set up regular international payments and this can make things a lot simpler, but because this is a volatile area you should still review your arrangements from time to time to make sure you’re getting the best available deal. It may be to your benefit to use multiple types of service – just stick with the ones you know you can trust.