Whether you’re an individual investing offshore, or you’re a business in the import/export space, our experts have identified four common but critical mistakes you should avoid to make the most out of your international transactions.
Assuming your bank has the best currency exchange deal
Most people automatically turn to their bank for international money transfers, believing it’s the safest and most cost-effective option. This widespread misconception often leads to unnecessary expenses.
The reality: Banks typically charge higher fees and offer less favourable exchange rates compared to specialist providers. The way they structure their margins is often murky and they have limited support (unless you are a JSE-listed company with frequent and large transfers).
Expert tip: Consider using a specialist foreign exchange provider. Because they offer better rates and lower fees than banks, these providers can save you thousands of rands, especially when it comes to larger transactions.
Failing to account for exchange rate fluctuations
Currency movements are always in flux and even small changes to exchange rates can significantly impact the final amount received. A seemingly minor exchange rate movement of just 1-2% can translate to thousands in lost value when transferring funds abroad.
The solution: Look for a foreign exchange provider that offers tools like Forward Exchange Contracts (FECs) - these allow you to lock in favourable rates for future transactions. This approach offers value for:
- Businesses that regularly import goods and want to maintain stable costs
- Individuals making significant international transactions, such as buying property overseas or diversifying investments offshore
- Anyone wanting to protect against adverse currency movements
Overlooking hidden fees that erode value
When sending money internationally, the bank’s advertised fee is rarely the only cost involved. Hidden charges can substantially lower the amount received through your currency exchange.
Example scenario: Let’s say you’re sending R1 million to the USA and the spot rate is R18 to the dollar. Your bank might charge you R18.36 to a dollar – that amounts to a ‘spread fee’ of R0.36c for every dollar you buy.
While these cents don’t sound like much, it adds up to 2% of your transaction value or an extra R20,000 straight out of your pocket. That’s before factoring in additional SWIFT charges and potential commission or communications fees that banks often add on.
What to look for: Going with a foreign exchange provider that offers transparent fee structures means you won’t be hit with nasty, unexpected charges when sending money abroad. Instead, you’ll get a clear view of the costs upfront, knowing exactly what you’re paying for and why.
Relying on slow or inefficient transfer methods
Outdated bank processes that still rely on manual systems can cause significant delays in international transfers, sometimes taking three to five business days to complete. This can also lead to banks making transfer errors and not being as transparent as they could be.
The consequences of this can be:
- Missed payment deadlines
- Exchange rate risks during the processing period
- Strained business relationships
- Unnecessary administrative burdens
The solution: Select a foreign exchange provider that taps into modern technology and innovative tools that speed up processing times and streamline compliance procedures. The right partner will handle document requirements in a way that saves you time and hassle.
Make smarter international money transfers with expert currency exchange services
Don’t let misconceptions about sending money abroad cost you time and money. If you choose the right provider, you can enjoy:
- More competitive exchange rates
- Lower transfer fees
- Faster transaction processing
- Personalised services and support
- Tools that protect you against currency fluctuations
For more information, get in touch with a Future Forex expert and discover how we can simplify your currency exchange, saving you time and money in the process.
For further insights on common mistakes to avoid when transferring money internationally, read the full article on IOL.
