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Cheaper Money Transfers

March 11th, 2015 at 06:43 pm

The first topic I would like to address is the topic of FX transfers. To some people this concept might sound foreign, but to the majority of people it won't.

Some people don't even think about it. When they needed money transferred abroad, or require their local currency exchanged to other currencies, they go directly to their bank branch and perform the transaction. They don't know how much they pay, or else, they would not have done so.

I have personally lived in several countries in my short life. When you transfer thousands of Dollars a month, you become much more aware of this topic. At first when I traveled to the east, I used the first FX company I heard of, and probably the only one to this stage, together with MoneyGram, which is Western Union. With their travelers checks, together with some transfers to India, I started noticing very high fees. I was transferring about $750 to a friend's bank account in India to pay off for my monthly expenses. The fees were $25, and I was losing $40-$50 more on the exchange rate compared to the interbank rate.

That sounds not a whole lot, but when you're talking about 10% of the money I transferred each time, that was definitely annoying.

Quick jump to the late 2000's when I'm transferring hundreds of thousands of Dollars for asset purchases, and before I hit the send button on my online bank account, I start re-thinking and investigating through the market.

I figure out that the margins that banks have almost worldwide are at about %1-%2 on liquid currency pairs (where trade volumes are high), and as much as %5 on less common pairs. When you have to pay an additional 2 to 5 per cent on each dollar you transfer, and you're purchasing an asset, that becomes very highly effective in terms of your financial situation.

Our tendency to approach banks with any financial inquiry, service or consultancy we need, is rooted within us, but it is sometimes the worst thing to do.

I will write more about this topic, and what are the alternatives to foreign exchange transfers, as well as almost all aspects relating to one's savings.

Eventually, I think that over a person's lifetime, saving where it matters, could save 5-10% of that person's expenses. Imagine you're getting a 10% salary raise, how much would you work to make it happen? Now think how little you should work in order to educate yourself financially and stop acting like a robot when you have to perform any financial activity, and understand how valuable this advice might be for you and your family.

2 Responses to “Cheaper Money Transfers”

  1. Buendia Says:

    I would like to know how you do it now. Particularly for small amounts... My father in law sends small checks to my husband for his birthday, too, and the entire thing is eaten up by a $25 fee just for cashing a foreign check.

  2. mattdv Says:

    Thanks for the comment. View my next post please Smile

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