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Today’s post comes from Mike, a fellow S&S reader from the UK. He’s got the inside scoop to help our expat readers save big on money transfers!

How To Save Up To 50% On Money Transfers

British expats are saving 50% fees on money transfers. Do you want to do the same?

For expats, moving money abroad is like going to the dentist. It’s an unpleasant yet unavoidable experience. Whether they’re buying real estate or transferring their monthly pension to an overseas bank, intermediaries always seem to take a greedy cut.

As time goes by, this arrangement can cost untold thousands of dollars. But it doesn’t have to be this way. More than ever, money transfer companies offer a viable alternative to the banks.

Here’s how you can save up to 50% on the fees you pay to move money internationally.

What are money transfer companies?

Money transfer companies do precisely what their name suggests – they move money abroad for their clients. However, banks do as well – so, what makes money transfer companies different?

First and most importantly, money transport companies transport cash internationally for less. We’ll get into exactly how they do that later, but in some cases, customers pay 50% less in fees.

Secondly, they offer specialised customer service. Unlike the banks, money transfer isn’t an ancillary service to cash transfer companies – it’s all they do. Fully immersed in this business, they can offer expert advice (e.g. how to transfer large amounts, when to initiate a transfer, etc.) that banks don’t.

Thirdly, they offer services that complement their core business. For example, OFX offers forward contracts, as well as receiving accounts that allow online sellers to accept multiple currencies.

In short, money transfer companies offer services that make it cheap, easy, and convenient to move funds globally.

How do money transfers save you money versus the banks?

Despite existing since the early 2000s, online money transfer companies have only started to gain public consciousness recently. Transferwise started the wave – founded in 2010, it is now the world’s second largest cash transfer firm, trailing only Western Union.

How were they, and other money transfer companies, able to grow so fast? First of all, their overhead is much lower than the banks. They have fewer offices to manage and employees to pay – as a result, they can charge lower/no fees, and offer an exchange rate closer to the standard interbank rate.

To lay things out in easily understandable terms, let’s compare the Royal Bank of Scotland (RBS) to Currencies Direct. To initiate a cash transfer, RBS charges their customers 10-30 GBP (less for next-day delivery, more for urgent, same-day deliveries).

Unless you’re sending a considerable sum of money, moving money this way already hurts.

Then, they’ll transfer your money using a GBP/EUR exchange rate of 1.1100. Compared to the interbank rate of 1.16531, that’s a difference of 4.7%. The more you send, the more egregious the gap.

What if you used Currencies Direct? Right out of the gate, there’s no fee for transfers – excellent! But what about the exchange rate? As of the writing of this article, they charged 1.16100 – just a 0.3% spread.

British expats are catching on

Thanks to lighter overhead, money transfer companies can charge razor-thin margins and still turn a profit. This dramatic difference in cost has not gone unnoticed by Britons. Many pensioners live abroad in places like Spain and Thailand. Others have been moving assets offshore to hedge against a no-deal Brexit.

When you regularly move money internationally, you become keenly aware when you’re getting a raw deal. Let’s say you’ve taken advantage of Thailand’s retiree scheme. Every month, you move your 1000 GBP/month pension to your Thai bank.

If you did this through Barclays, you would get a GBP/THB rate of 38.1124. This rate means you would get 38,112 THB on the other end, less fees. What if you switched to Currencies Direct? You would pay no charges up front, and you would receive a GBP/THB rate of 41.274. As a result, 41,274 THB would land in your Thai bank account.

Every month, you would get 3,000 THB more. Money goes far in places like Thailand – 1,000 THB extra is five days worth of food, several days’ rent, and two nights’ worth of drinks. In this example, changing to a money transfer company would improve your quality of life considerably.

Why do people in other countries cling to their bank?

Given the math we just showed you, it’s a wonder anyone would continue to move money through a bank. However, many continue to stick with their financial institution. This issue is especially prevalent in countries like America.

A considerable segment of the population has never left the USA, except on short vacations. Unlike Britons, the overwhelming majority has never accepted a job abroad. As such, most have never had a bad experience moving assets internationally.

For instance, when a vacationing American exchanges 100 USD at a lousy rate, they rarely notice the 5-10 USD they get stiffed. However, if they were to move 10,000 USD in savings to a new bank account abroad, you bet they would notice a 500-1,000 USD difference.

Additionally, there is a generation gap when it comes to acceptance of online commerce. According to a Canadian Banker’s Association survey, 87% of Millennials were satisfied with mobile banking security versus only 58% of Boomers.

However, this situation is likely to change in the coming years. According to a Pew Research Study, Millennials are poised to overtake Boomers as America’s most populous generation in 2019. As Millennials and Generation Z’ers become more dominant, acceptance of money transfer companies will increase abroad.

Why should you switch to a money transfer company?

Do you plan on making the jump overseas soon? Have your eye on a lovely piece of real estate somewhere sunny and warm? By now, it should be abundantly clear money transfer companies are your best option.

Companies like Currencies Direct, Transferwise, and OFX offer low/no fees, exchange rates close to interbank, and expert advice that will maximise savings. Banks charge fees upfront, post exchange rates that vary 4-5% (or more) from interbank, and often, offer no advice.

The hardest decision won’t be whether to stick with your bank, but which money transfer company to go with. Honestly, deciding on the best one isn’t easy, but most non-bank alternatives offer superior cost savings and customer service.

Let’s say you need to transfer money to Tenerife to buy a 100,000 EUR condo in Playa Las Americas. Through Barclays, you’ll get a GBP/EUR rate of 1.0976 – less fees, this rate means you would have to transfer 91,107 GBP to complete the sale.

However, if you sent the funds through Currencies Direct, you’d receive a rate of 1.1530. Because of this, you would only need to send 86,730 GBP – almost 4,400 GBP less! With all that extra cash, furnishing your new winter abode will be a breeze.

Stop letting High Street banks bleed you dry

For decades, a lack of viable alternatives let Britain’s major financial institutions to price cash transfers on their terms. With cheaper, friendlier, and more convenient transfer companies now available, you no longer have to waste your pence.

Do your research, move your money, and save – it’s that simple.