So, your balance in your bank account is growing quite nicely and now you are interested in sending money abroad or back home - it poses the questions as what is the most cost-effectiveness way to do this?
First, let's go over what the interbank rate is.
The interbank rate is the exchange rate which big banks or companies use to trade currencies in massive quantities. It is calculated by using the mid-point between the buy and the sell price of two currencies. The interbank rate is also commonly referred to as mid-market or standard exchange rate. You can check Google or XE currency to see what the interbank rate is at any given time.
When transferring regularly or a significant amount, it is best to compare specialised international money transfer companies.
Traditionally, using your bank to execute the transfer has been commonly done as it is convenient and easy to do without having to involve an intermediary. Banks can appear to offer more safety and security when sending money, but their downfall is their cost-effectiveness. The table below will give you a snapshot of how banks fare against some of the top-rated international money transfer providers. It highlights that even the smallest difference in mark-up can have a noticeable difference in the amount you receive.
The table can also be applied if you are getting your salary deposited into a different currency denominated bank account and it is as simple as opening a bank account in the currency of your salary to reap these savings. See the article on digital bank accounts.
Transferring Funds from EUR digital bank account to New Zealand
*Rates used in the examples above were effective 26 May 26, 2020, and per my personal account with each provider (exception is CaixaBank which was found online).
Sign up here:
TransferWise -> Sign up here (affiliate link)
XE -> Sign up here
World First -> Sign up here
CurrencyFair -> Sign up here
Note, most traditional banks are not very good at being transparent with their exchange rate before the transfer, so the rate used and fees charged will usually come as a surprise afterwards.
Below is a more detailed comparison table of the most competitive international bank transfer providers:
Note:
- All the providers above have the required licenses in place, providing the same level of security as the leading banks.
- None of these companies offers a cash drop off or pick up centre. There is minimal options and my suggestion if you do have a large amount of cash is to use this as spending money.
Overall, any of the above providers are better than using your traditional bank when sending money abroad and ensuring that you are getting the best possible interbank rate and maximising monetary savings. I use TransferWise as it is partnered with my digital bank. It means that I can utilise their competitive fees while doing a standard bank transfer. Easy. If you are interested in using TransferWise, you can use the following link to sign up.
As exchange rates are fluctuating daily, I suggest checking TransferWise or Monito for a real-time comparison of the foreign exchange companies. Often there is not much of a difference, so if you are making regular transfers, it is best to find one provider and check every now and again to ensure the provider is still providing competitive rates.
Information provided by GoBuoyant is general in nature and does not take into consideration your personal financial situation. It is for educational purposes only and does not constitute formal financial advice. Remember, the value of any investment can go down as well as up.
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