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A money transfer company sends money from one location to another, and in most cases, the money needs to be changed from one currency type to another.

Sending money within your own country is the easiest, especially since most banks allow you to do it for free, and companies like PayPal allow you to do it for free too.

However, if you want to send money abroad, and especially if you want to exchange your currency, you are going to have to find the money transfer company that is right for you. Here are the things you should know before you decide.

When you send money from one account to another, it is sometimes called a wire transfer.

Even though it is technically incorrect, when a website refers to moving money, they often call it a wire transfer when it isn’t.

Ergo, when you read about wire transfers and money transfers and money exchanges, assume they all mean the same thing; it just makes researching a little easier.

The Three Ways That Money Transfer Companies Make Money
There are three ways a transfer company makes its money.

The first is to charge the sender a fee, the second is to charge the recipient a fee. The third is to skim money from the exchange rate.

These are the only three methods by which a transfer company makes its money. If they claim they do not charge fees, then they are skimming from the exchange rate.

Some companies make their money by employing all three methods, where they charge a fee to the sender, to the recipient, and they offer a less-than-market price exchange rate.

Do They Skim from The Exchange Rate?
Companies like TransferWise (Wise), CurrencyFair, and a small minority of others will offer you the current exchange rate as seen on the market.

Since they are offering the market exchange rate, they have to charge either you or the recipient a fee.

If they are offering the market exchange rate and they are not charging a fee, then something funny is afoot.

Skimming from the rates is easy. Let’s say that US$1 gives GBP£0.60, an exchange company may only give you £0.50 for your $1.

Then, when they sell your dollars on the market, they keep the £0.10 that is left over for themselves.

Many companies claim they do not charge fees for transfers.

This is sometimes the case when moving the same currency within the same country, such as how PayPal enables you to send money to your friends and family for free.

However, if a company offers to send money abroad without a fee or claims they will exchange your money without a fee, then they are actually skimming from the rate.

Prior to them closing their doors, Travelex claimed they didn’t charge fees, but were in fact skimming 10 to 20% off of their exchange rates.

The Amount You Pay and The Amount Being Received
Whether you are transferring the same currency in your own country, or you are transferring and exchanging, there is always the issue of how much you pay and how much the other person receives.

Transparency in the money transfer market has always been a very tricky business, especially since the murkiness within the industry is quite legal.

If you are trying to pick the best transfer company for you, find a company that is open and honest about how much you are putting into the account, and how much the recipient receives.

After all, if you send $100 to somebody in your family, you don’t want to discover that only $91 was received because of the fees being applied at one end or the other.

Ideally, you want to find a company that shows you exactly what you are paying, exactly how much is fees, how much of the exchange rate is being skimmed, and how much the recipient receives.

When Hidden Fees Strike
The worst part about hidden fees is that you are often stung before you realise you were ripped off.

Some people call rate skimming a hidden fee, which it can be if the transfer company claims that no fees are applied.

In many cases, transfer companies pile their fees at the back end of the transaction so that they look like the best on comparison websites.

For example, they may add administration fees, service charges, or odd-looking taxes to your transaction.

What is worse is that they only apply the fees after you have entered your card details.

Then there are money transfer companies that look good on money transfer comparison websites, but you discover you have to spend $X amount before you get their best rate.

Then, there are those that add service charges onto your account itself, but they are paid by the recipient.

Hiding the fee on the recipient’s side is a very nasty trick.

Sometimes they charge a fee outright so the recipient doesn’t receive the full amount, and other times they charge for the recipient to move the money either to another account or to withdraw it to a bank.

Again, this is the sort of thing you don’t really discover until the transaction is complete.

Final Thoughts – Vigilance is Key
Hidden fees and rate skimming seem like rather unpleasant things, but they are common in the money transfer marketplace.

That is why, if you are looking for a transfer company, start out with a small initial transaction, and beware of companies that offer the first transactions for free.

Don’t forget that hidden fees are unfair and nasty, but they are not considered fraud, which means large companies can get away with using hidden fees and the only defence you have against them is to not give them your custom

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