Remitting money back to India can be expensive. However, it doesn’t necessarily have to be that way. With simple tricks and tips, you can make sure that you get the most bang for your buck. Things such as knowing the jargon, using the most cost effective service, and timing your money transfer can make your money go a lot further. Keep reading for a simple explanation of why money transferred to India is subject to fluctuating exchange rates. Then be sure to read our list of easy tricks and tips that help maximise your money by taking advantage of India’s often-fluctuating exchange rate.
Why do exchange rates change?
Most international currencies change because they float. This means that the value of the currency relative to other currencies is set by supply and demand. This translates to traders of currencies around the world buying and selling each different currency. Whilst some countries government set a fixed exchange rate, most fluctuate. Foreign exchange is traded around the clock, all around the world. While the markets may be closed in India, other markets are still open. This means that trading activity really is 24/7. Because of this, foreign exchange rates can literally change minute by minute. For example, 2009 saw the Indian Rupee reach new highs against the United States Dollar. However, the same year also saw the Indian Rupee subsequently reach new lows. Depending on how much money you wish to transfer to India, the exchange rate changes have a varying effect. If for example, you are remitting a small amount, a change in the exchange rate may result in a slight difference. However, if you are remitting a large amount, a change in the exchange rate can mean a huge difference.
Know the jargon
Foreign exchange has its own unique jargon. It pays to learn some common terms so that you know exactly what you are getting into with foreign exchange. Some common terms include:
- Sell rate: This is what you get when you exchange your local currency for foreign currency
- Buy rate: This is what you get when you go the other way and exchange foreign currency for local currency
- Interbank rate: This is sometimes called the bank to bank to rate. This is the wholesale rate that banks exchange currency at between themselves.
By knowing these terms, you can be sure that you are signing up for exactly what you think you are. Some services such as OrbitRemit go one step further and calculate exactly what receivers of remittance get. This helps avoid confusion and further simplifies the remittance process.
Investigate the economy
Before sending money back home, it pays to do a bit of research. Adverse economic events weaken the country’s dollar, so the currency you send gets converted into more. Conversely, beneficial economic events strengthen the local dollar. This translates to currency not going as far. If you expect either adverse or beneficial events to occur, be sure to take this into consideration when remitting money to India.
Monitor exchange rates
Watch the daily “interbank” rates on your chosen currency so you know what makes a good exchange rate. Currency fluctuates constantly. This means that the price you get will normally never be the same from day to day.
Many things cause travel money to wobble, from employment figures to economic forecasts to interest rates, so watch currency movements and transfer when the rate is climbing.
Conversely, if you have money you wish to transfer back to local currency, do this when the rate is falling.
FXStreet is a good site to monitor exchange rates on, because a live display of rates is always shown.
Compare apples with apples
If you are shopping around on exchange rates, make sure that you always account for any additional transaction fees or commission as well as the foreign currency exchange rate at the time of transaction. This means that you are calculating the total cost of remitting your money. By comparing total costs of remittance, rather than just the rate, you can make sure that you are getting a good deal. While a deal or exchange rate might appear to be extremely attractive, it might not be competitive at all once you add in the extra fees or commissions.
Shop around and use the cheapest provider
Currency rates not only fluctuate from day to day, but they also fluctuate from company to company. While you might expect prices to be the same across the board, it is rarely the case. This means that is extremely important to shop round for the best deal before you remit money to India. Finding the cheapest provider can mean great savings, especially if you are remitting a substantial amount.
OrbitRemit offers the lowest rates for sending money back to India, at all times of the year. For each remittance with OrbitRemit, there is a fixed flat fee. Other services commonly charge fees on a percentage basis, meaning that the more money you transfer, the more you pay. In terms of the exchange rate, OrbitRemit also offers one of the best exchange rates available on the market, again at all times of the year. This rate is better than what your local high street bank offers, meaning that more money gets to you where you want it to be.