Exchange rates play a significant role in determining the cost of international money transfers. This is because exchange rates determine the value of one currency compared to another. In this article, we’ll discuss how exchange rates impact money transfer services.
Understanding exchange rates
Exchange rates refer to the value of one currency in comparison to another currency. For example, if the exchange rate between the US dollar and the Euro is 1.20, it means that one US dollar is worth 1.20 Euros. Exchange rates are constantly fluctuating due to various economic factors such as inflation, interest rates, and political instability.
Impact on money transfer services
When you send money to another country, you need to convert your currency into the currency of the receiving country. This means that you need to pay attention to the exchange rate at the time of the transfer. If the exchange rate is favorable, you’ll get more of the receiving currency for your money. If the exchange rate is unfavorable, you’ll get less.
For example, let’s say you want to send $1000 from the US to the UK. If the exchange rate is 1.20, you’ll need to pay $833.33 to get £1000. However, if the exchange rate drops to 1.10, you’ll need to pay $909.09 to get the same amount of pounds. This means that exchange rates can significantly impact the cost of money transfer services.
Foreign transaction fees
In addition to exchange rates, money transfer services like Ria Money Transfer often charge foreign transaction fees. These fees are charged to cover the cost of converting currencies and processing international transactions. They can be a fixed fee or a percentage of the total amount being transferred.
It’s important to note that foreign transaction fees are often not included in the exchange rate that you see online. This means that even if the exchange rate appears to be favorable, the foreign transaction fees can add an extra cost to your transfer.
Impact on remittance services
Remittance services are those that allow individuals to send money to their families and friends in other countries. These services often target customers who are sending smaller sums of money, such as migrant workers.
Exchange rates can have a significant impact on the cost of remittance services. This is because customers who are sending smaller sums of money may not be able to afford the additional costs associated with less favorable exchange rates and foreign transaction fees.
According to the World Bank, the global average cost of sending remittances was 6.8% in 2019. This means that if someone wanted to send $100 to their family in another country, they would have to pay $6.80 in transaction costs. The cost varies depending on the countries involved in the transaction, with some countries costing upwards of 10% to send money.
Exchange rates play a significant role in determining the cost of money transfer services. The fluctuations in exchange rates can impact the amount of money that you get for your transfer and the amount you pay in foreign transaction fees. If you regularly send money abroad, look for a money transfer service that offers low fees and favorable exchange rates.
