So you are planning on conducting the money transfer to india or other countries but not sure about the exchange rates? International money transfer is different from the traditional methods. When sending money across borders, there are specific rules and regulations that the recipient or the sender country have set.
To send remittances internationally, you have to take care of how exchange rates affect people and businesses. Exchange rates are the price of a foreign currency that one may buy, e.g. pound sterling.
The increase in the value of sterling means that one pound may buy an increased amount of foreign currency.
Effect On Businesses
Businesses that import and export goods have to pay close attention to the exchange rates. The value of goods is directly related to the value of a currency. Businesses that trade domestically should also be aware of changes in the exchange rates. They will have a non-direct impact on the broader economy.
Suppose you own a business that sells products or services to any foreign country. In that case, the fluctuation in the exchange rates will directly impact the bottom line. The force of this impact will be based on how the invoices are issued.
If invoices are submitted in a foreign currency, then you may face the risk of getting less money than expected. That is because the exchange rates fluctuate at the time the invoice is issued.
Issuing the invoices in the local currency can have a lower impact as the buyers overseas change their currency to yours to make payments. The business will get the full invoice amount regardless of where your exchange rate sits by using the same currency.
When selling overseas, if your business has contracts with a foreign supplier, you may become vulnerable to fluctuations in the exchange rate.
For instance, if you purchase goods from the supplier in China invoiced at 300,000 Chinese Yuan for the next shipment due in a month’s duration with an exchange rate of 8.74. Then, your invoice value will be at £34,330.83 if paid today.
Effect on Individuals (When Conducting Online Money Transfer)
When conducting online money transfer to india or any where else, one must know that exchange rates float freely against each other, which constantly fluctuates. Currency valuations are then determined by the flow of currency to and out of a country.
Higher demand for a particular currency mostly means that the value of this currency will boost. Currency demand is then driven by tourism, international trade, mergers and acquisitions speculation, and a perception of safety in terms of geopolitical risk.
Most US banks offer poorer rates than the base exchange rate, mainly between 2 to 4%. Combine the wire transfer fees with an exchange rate, and you may be overpaying for the transfer by around 5 to 7%.
Hence on a USD 1,000 transfer, you will have to pay US$50-70 in the wire transfer and exchange rate costs. And, there are likely some other payments that will be charged to an amount you are transferring internationally.
To send money to india, these charges come from the intermediate banks and the recipient’s destination bank. The intermediate banks are the bank systems that your international wire transfer will pass through on its way to the destination bank.
They will charge around $10 to $20. Finally, the destination bank will charge an incoming wire fee to deposit the money in a recipient’s account. This will run from $10 to $20.