Currency exchange occurs when sending and receiving money overseas where one currency is converted to another currency which is done at the time of the transfer.
Due to supply and demand market dynamics, the exchange rate fluctuates daily. If you want to send money internationally, you'll want to keep an eye on the currency conversion rate because it determines how much money you may get when converting one currency for another. The best exchange rates give you more foreign currency for your dollars.
This article covers exchange rate definition, mid-market rates, and how to get the best exchange rates when sending money abroad.
What Is An Exchange Rate?
The value of a currency in relation to another currency is known as the foreign exchange rate. In other words, the exchange rate determines how much one currency is worth in comparison to another.
Let's imagine you wish to send money from the United States to India. You will make your payment in US dollars, and your recipient will receive the funds in Indian rupees (INR). The USD must be converted into INR at the time of transfer, using the currency exchange rate. If you send $200 to India and the dollar exchange rate today is 78.11 INR, your recipient should receive Rs 15,622 (without accounting for transfer fees and other costs). Find the best USD to INR exchange rate today.
What Is A Mid-Market Exchange Rate?
The mid-market rate (also known as the interbank exchange rate) is the midpoint between the buying and selling prices of any two currencies at any time. This is the rate at which banks trade currencies between one another. It is the real rate that you will find when you search on Google or independent sources such as Reuters, and XE.
Buy and sell rates of currency are determined by the ever-changing demand for and supply of the currency, which is influenced by global and regional macroeconomic factors. As a result, each currency pair has its unique mid-market exchange rate, which is impacted by imports, exports, trade agreements, economic conditions, and a variety of other factors.
What Is An Exchange Rate Margin?
Banks and money transfer services use the mid-market rate when they trade between themselves. However, banks and other providers set their currency exchange rates for customers. The exchange rate margin is the percentage difference between the mid-market rate and the rate offered to customers. This difference in rate is one of the ways banks and providers make money. Even a slight difference in the rate can make a big difference when sending vast sums of money.
These exchange rate margins can vary greatly depending on the money transfer providers you select to send your money to and can range from 0.01% to 10% or more depending on the amount of money you're sending. It is preferable to avoid banks in order to obtain the best exchange rates, as banks rarely provide the best rates.
To entice customers, certain money transfer companies charge a 0% fee or charge no commission. They may be concealing the costs in their exchange rate. Some money transfer companies offer the mid-market rate for your international money transfers, such as Wise, and Instarem. Some may allow you to lock in a favorable rate for a specific time period, ensuring that rate swings do not affect your transfer.
How To Get The Best Exchange Rate When Sending Money Abroad?
Various money transfer service providers charge different rates and hence, comparing service providers is highly recommended.
The exchange rate margin is profitable for most banks and money transfer companies. As a result, the closer you are to the mid-market rate, the more money your recipient will receive.
Before proceeding with the transaction, find the mid-market rate of your chosen currency pair on Google to determine how fair an exchange rate you are being offered by the service provider of your choice.
Most money transfer services will show you the offered exchange after you've filled in all of the required information for your currency exchange before you press send.
Compare Your Options On CompareRemitâs Online Comparison Engine
If you want to save money on international money transfers by receiving the best money exchange rates, CompareRemit's comparison engine is the way to go.
With a single press of a button, the CompareRemit exchange rate calculator allows you to compare exchange rates given by multiple money transfer services in real-time. You can also compare transfer fees, speed, and amount receivable, as well as read verified reviews of the top money transfer companies. This way, you'll be able to find the best option for your transfer requirements.
CompareRemit.com lets you:
It is available in select countries such as the U.S., Canada, the United Kingdom, and Australia, where there are huge remittance outflows. Countries like India, China, Mexico, and the Philippines are the top remittance-receiving countries.
Because the nature of the remittance market in each country differs due to volume, amount of competition, rules, legalities, and other factors, CompareRemit allows you to tailor your homepage so that it only displays your preferred transfer corridors or currencies.
CompareRemit has mobile apps for iPhones, iPads, and Android devices. The App has all the features and information you need to send money internationally at the best exchange rates. Read more on how to use the CompareRemit app.
You can use the app to:
One cool feature is that you can transition smoothly to partner money transfer apps to make the transfer once you are done comparing various remittance providers at your fingertips.
Steps To Sign Up on CompareRemit
To sign up for CompareRemit, follow the steps below:
Steps To Customize the CompareRemit App's Notifications
You can turn on or off notifications for your phone and email, depending on your preferences.
How to Use the CompareRemit App to Send Money Online Overseas
The Bottom Line
Although the exchange rate is not a fee, it is a cost of money transfer that must be taken into account. It will determine how much money your recipient will receive on the other end.
With the CompareRemit app, you can always stay up to date and send money internationally at the best exchange rates from anywhere. To compare the top money transfer service companies, download the CompareRemit App today.
Check out our guides on how to compare money transfer services, reduce transfer costs, and tips on saving time and money when sending money internationally.