People send money abroad for various reasons, including shopping, investments, financial support and gifts. The World Bank expects the value of global remittances to reach $630 billion in 2022. The financial support provided by expat workers is so important that even the UN observes an International Day of Family Remittances (IDFR).
No matter why you send money abroad, it’s natural that you’ll want to ensure that most of it arrives at its intended recipient without getting syphoned away by hidden fees and charges.
Many factors influence the value of your money. Economics, politics and even celebrity opinions can have an impact on how much you send and receive. Because of everything that affects FX rates, it’s hard to say when the best time to transfer money is. However, there are some general rules you can follow to save money.
Don’t use the banks
Most banks advertise that they charge 0% commission and no additional fees for international money transfers. However, even when this is true, banks will almost always be more expensive than currency brokers and online payment platforms.
Banks get their cut by adding a markup to the mid-market rate. The mid-market rate is the value between two currencies’ highest buy and lowest sell prices. It’s usually the most accurate way of discussing currency exchange rates, but don’t be fooled. Banks often add a hidden premium to their advertised market rates. They’ll do so on the premise that they must cover the administration expenses or protect themselves from FX risk.
Avoid the airport
If you’re travelling abroad and want to take some of the local currency with you, don’t leave your planning too late and resort to Airport currency exchange services. Bureau de Changes in airports charge more because of high operational costs, such as rent and 24-hour opening times.
Don’t use any service that charges commission
FX dealers already make money by adding a nominal markup to mid-market rates. Some may try to make even more money by charging customers a commission fee. Always ask if your chosen service charges any commission. If they do, shop elsewhere. It’s easy to find services with no commission and no hidden fees.
Is there really a “best time” to send money abroad?
Not really. But it may surprise you that banks are subject to seasonal trends that coincide with periods of higher spending, the release of financial reports and other factors.
While many of these do not directly influence how much money you’ll receive for your international transfers, they do affect things like inflation, interest and spending, which (if you see above) can have knock-on effects on the value of certain currencies.
Here are some annual occurrences you might want to avoid to get the best deals on your currency exchange:
- The increased demand for investment services and tax planning around December and January can affect national interest rates (although, given the current crisis, this is less noticeable as governments have kept a tight rein on interest).
- Major financial institutions release semi-annual reports on their investigations into the economy. These can cause brief, but pronounced swings in currency values as businesses scramble to adjust their financial plans in response.
- Major political and economic events are a common cause of currency fluctuations. Keep an eye out for any bad news that might affect international currencies’ value. Consider holding off on your payments until things settle down, if you can.
Avoid high activity periods
Most international money transfers are processed at the beginning and end of the month. People often make payments as soon as they receive their paycheck. Others send monthly remittances to dependants at the beginning of the month.
Some financial institutions will raise their prices or fees during periods of high activity. To avoid these spikes, send money in the middle of the month. Be sure to avoid sending money during or near public holidays such as Christmas when many others will have the same idea!
A few things to bear in mind…
- It’s important to note any public holidays in the country you’re sending money to. For example, if you send money to the US during Thanksgiving (around mid-November), US bankers might be busy enjoying a nice turkey while you wait in vain for your money to go through!
- Note that some banks and payment providers will not process international payments on a Sunday (unless it’s between two branches of the same bank, in which case it’s usually fine).
- Be careful not to fall prey to the ‘Friday Effect’. It’s easy to be less attentive on Fridays as you daydream about your weekend plans. You might make poor choices if you’re tired or distracted. Whether or not this is true is a subject of debate, but it’s an important enough factor that researchers have studied the potential of this phenomenon on the stock markets.
- Tracking minute-by-minute variations in currency value to find the best deal of the day is impractical for even the most seasoned forex traders. In this case, the most important thing to keep an eye on is bank and payment provider business hours. Sending a payment abroad too late in the day might mean your money only arrives at its intended recipient the following business day.
Our advice to you
Things in the world of finance are not predictable and are constantly changing. Before you send money abroad, always check if the rate you’re offered matches the figures shown online.
In addition, be sure to compare quotes from multiple providers. There will always be some transfer fees involved, but a little bit of research and bartering could save you a lot of money on large transactions. Always seek the advice of a financial expert to help you save the most when purchasing foreign currency or sending international payments.