Did you ever send money to India? In this article, we will throw light on how to transfer funds in a different currency. There is a set of steps you need to know, understand and follow when you want to send your money into another currency.
People leave their home countries to earn money in a foreign currency, which for the migrant worker is the local currency, but foreign currency for the recipient. What currency is being earned depends on where the worker is and where the money is sent to.
Now, let’s take a look at the steps involved in receiving funds in a foreign currency.
Foreign currency account:- People typically prefer money transfer to India or another country through banks because they think that banks are safer than other channels to send money through. Now, there are two options to follow. One, if you are an Indian living in the USA and earning dollars, you can either send dollars to your local bank account in the local currency, which will be the Indian rupee. Or two, you will have to open an account in the foreign currency which will be in dollars in this case. But, in doing so, you will have to check if the concerned banks offer these services because many banks may offer accounts in US dollars and some may offer these services in a different currency.
This process of account opening will lead us to the second step which is the currency conversion.
Currency conversion:- If you go with the first option, the bank will automatically convert your currency on the day of transfer of funds by applying the same day’s market currency exchange rates; but, in doing this the banks charge a fee that varies and depends on the volume of funds and the exchange rates.
And if you choose the second option, you will receive the funds as they are without any deductions, enabling you to withdraw the amount at a time of your liking.
Now, let’s see the requirements to open a foreign currency account.
- You will be required to provide your identity to the bank;
- You will provide the appointment letter your foreign employer has issued you; and
- An initial deposit of the same currency in which you intend to open your foreign currency account.
Generally, different banks have set different requirements but these three steps are followed by every bank universally with the initial deposit amount changing from bank to bank.
Now let’s take a look at a few other important factors while opening a foreign currency account.
- Check if the foreign currency you deal in is accepted by your bank because normally banks deal in a limited number of currencies instead of all foreign currencies.
- Many banks require a minimum balance to be maintained in the account. Check with your bank if that minimum requirement matches your cash flow.
- Check the complete list of fees and expenses that your banks may charge you in maintaining your account and also on certain transactions to avoid high-fee surprises.
- Also, check the regulations of your bank to charge a fee each time you want to exchange the amount into another currency.
- Check if there is an upper or lower limit for moving funds from your accounts because different banks have different rules and upper or lower limits can halt your business activity.
- Keep a look at the speed and time of transactions your bank takes in a local as well as an international transfer.
- Also check if your bank allows fund-moving through your smartphone, which the online money transfer to India or another country through a company such as ACE provide, and check the fee structure for this option.
Let’s now take a look at some of the advantages of transferring money into a different currency.
- Income tax does not apply to foreign currency accounts which helps you save more. But, check it with your bank to be on the safe side.
- There is no withholding tax (WHT) on withdrawals from your foreign currency accounts either. Therefore, you can withdraw your dollars in thousands without having to pay WHT.
- Through your foreign currency account, you can transfer money overseas by a wire transfer by paying some processing charges.
A few disadvantages also come along with having a foreign currency account. These are:
- You have to keep at least a few hundred dollars in your FC (foreign currency) accounts which are quite hefty if translated into your local currency.
- FC accounts earn low-interest rates.
- You will be charged a fee if you deposit a cheque for clearance.
- You have to give prior notice to your bank in which you maintain your FC account if you have to withdraw large amounts as normally banks do not keep large amounts of foreign currency and therefore make specific arrangements for providing large FC amounts.
- It can take a lot of time to clear a cheque presented in the foreign currency.
Conclusion:- This article has guided us completely about how foreign currency accounts open and how they operate along with their advantages and disadvantages. Foreign currency accounts are essential if you want to send money to India online or through banks. Otherwise, a few online money transfer companies of repute and credibility such as ACE also help customers send funds in foreign currencies but with almost the same requirements and somewhat similar steps explained above.