6 Strategies to Minimise Remittance Fees
Here’s the thing. You need to transfer money internationally, but you want the least amount of fees. After all, the lesser the service fee, the more money your recipient can receive.
What should you do? Minimise remittance fees by implementing specific strategies, including the following:
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Transact less frequently.
Every remittance transaction costs money in service fees. Thus, one straightforward way to reduce your remittance fees is by transacting less frequently. If you’re used to sending money four times a month, aim for just twice or even once a month.
This strategy is particularly effective if your money transfer operator charges a flat fee for every remittance transaction. Imagine paying a flat rate of £3 per remittance. Four transactions a month translate to a total monthly remittance fee of £12, but once a month means a cost of only £3.
That may not seem much, but every penny counts. Over time, fees add up. In the above example, it’s a difference of £108 every year – i.e., £144 when you send money four times a month as opposed to £36 when you send money only once a month.
2. Send more money per transaction.
Does your remittance service provider charge a fee calculated as a percentage of your transaction amount? In this case, they probably have tiered pricing; in other words, they charge a lower rate for higher transaction amounts. For instance, a company may levy a 1.75% service fee for every transfer below £1,000 but charge only 1.25% for transactions £1,000 and higher.
In this case, a £900 remittance will cost you £15.75. However, by adding £100 and raising your transaction amount to £1,000, you’ll pay only £12.50 in fees. In this case, you get to send more money but shave £3.25 from your transaction fee.
If the remittance company levies both percentage and flat fees, sending more per transaction allows you to extract more value from your money. A £3 flat fee on a £900 remittance translates to a flat fee of £0.0033 per £1. However, if you increase your transaction amount to £1,500, the flat fee per £1 decreases to just £0.002.
Tip: Combine the first and second strategies. When you send more money per transaction and transact less frequently, you may not even need to increase your total remittance allotment. You can just accumulate your funds throughout the month and send them all at once.
3. Choose the cost-efficient delivery method.
Check your remittance provider’s fee table, and opt for the least expensive delivery method.
When you send money overseas, you decide how your recipient will receive it. Delivery methods typically include cash pickup, direct bank deposit, debit card deposit, and digital wallet deposit. Your remittance service provider may charge a different fee depending on the delivery method.
For instance, cash pickup typically costs more than direct deposit to a bank account, debit card or digital wallet. If the difference is 0.5%, you save £5 for every £1,000 transaction by not opting for cash pickup.
4. Choose a cost-efficient payment method.
Just as remittance companies may charge differently depending on the delivery method, they may charge a variable fee depending on the payment method. As such, funding your remittance with a credit card may lead to more associated fees than using a debit card. In this case, it makes more economic sense to pay with a debit card. Just note that there may be non-fee-related benefits to using credit cards as a remittance payment method.
Digital remittance apps offer the option to pay for remittances through a linked bank account, debit card, credit card, and digital wallet. Cash is also an option in physical branches.
5. Take advantage of promotional offers.
Digital payment service providers typically have new-customer offers. For instance, some online remittance platforms offer unlimited zero-fee transactions within the first three months of sign-up. That translates to excellent value, so make sure to take advantage.
Your remittance provider may also offer regular discounted rate promotions. Time your remittances so they can coincide with such offers.
6. Choose a remittance company with a lower foreign exchange markup.
The exchange rate your money transfer operator applies to transactions can also cost you more or less when you make a remittance to the Philippines for example. After all, foreign currency conversion is typically part and parcel of overseas remittances.
The more favourable the currency exchange rates are, the less the cost of your remittance. Therefore, you want a provider that levies the least markup on market exchange rates. This will let you send more money per unit of your currency.
For instance, at an exchange rate of £1 to PHP 73.90, £1,000 will get your recipient in the Philippines PHP 73,900. However, if the remittance company has a markup of 1.8%, every £1 will buy you PHP 72.57, so £1,000 will get your recipient PHP 72,570. The money transfer operator keeps the difference between PHP 73,900 (the amount at the market rate) and PHP 72,570 (the amount at the marked-up rate) as revenue.
Minimise the Cost of Overseas Money Transfers
Minimise the cost of overseas money transfers and send more money for every £1 sent. To accomplish this, send more money per transaction, transact less frequently, choose the least expensive delivery and payment methods, take advantage of promotional offers, and use a provider that offers favourable foreign exchange rates.