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March 7, 2015
When you bought your home in America did you shop around for the best mortgage rate possible or did you just take the first loan offered to you?
If you are like most home buyers, you shopped around for the best deal. We all know that saving even half a percentage point on your mortgage can translate into huge savings over time, so why wouldn’t you do the same when transferring money abroad to purchase a home or property in a foreign country?
Banks turn a tidy profit sending money from one country to another. Unfortunately this is at your expense. Not only do they charge a large fee, they often give poor currency exchange rates as well. If you were to buy a $200,000 home abroad, saving just one percent sending your money overseas would mean another $2,000 in your pocket. Add another percent or two for getting a better currency exchange rate and you could easily save over $5,000 on a single transaction!
A quick search on Wells Fargo’s Foreign Exchange Services page just highlights this issue. Converting $200,000 with Wells Fargo will net you €166,430.89 Euro while transferring that same amount using Send Money Cheaper’s recommended foreign exchange firm will result in €175,000.60 Euro. That’s a savings of nearly $10,000!
The best place to start searching for a cheap international money transfer is your personal bank. Rarely will they offer the best rate, but it is great for establishing a benchmark cost. Once you have received a quote from your bank, compare that with the rates you get from private money transfer firms. You can compare multiple firms at one time using this comparison tool from SendMoneyCheaper.com.
Once you have found the best rate for sending your money overseas, take a little time to research your chosen source. You’ll want to ensure that you’re using an exchange firm that is regulated to protect your money in the case of a bankruptcy or insolvency. Not all exchange firms are regulated so this is important to keep in mind.
There is a long-winded answer and a short one to this question. The short answer is greed. Big banks are greedy. They like to charge you a large percentage over the rate they buy and sell currency to each other; typically around 4% to 5% plus a hefty fee to send money overseas. Foreign exchange firms are willing to take a smaller percentage; usually around 1% over the rate they buy a currency.
In addition to the savings you get when using a private money transfer firm, they often have better customer support than large banks. Most exchange firms have currency specialists that can advise you on the best time to transfer large sums of money abroad based on the currency exchange rate fluctuations. If you are considering using a bank to send money overseas, it might be time to compare private money transfer firms and save yourself some money.