Here are six key considerations any expat in the UAE should be making ahead of remitting or sending money back to their home overseas.
Best time of the week to remit
Western weekdays are the best time to send money since the live exchange rates are active only then, which is from Monday to Friday.
By availing the live rate on a weekday you can save on your remittance, as on the weekend it’s just an approximate rate, which is often higher. Set exchange rate alerts to follow trends and find the best time to remit.
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Choosing an ideal exchange rate
Exchange rates can affect how much money you receive at the other end and it can have a notable impact on larger transfers. But the foreign exchange market is very volatile.
Currency exchange rates keep fluctuating every day and every minute, so choosing the best time to send money matters, to make the most of it. But that depends on whether you have time to wait for a better exchange rate.
Another way to take advantage of exchange rates is by watching a broker's website and tracking the different rates. If you do this, you may be able to spot a good rate and get it before someone else does.
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Don’t just go for low exchange fees
Exchange rates, however, aren’t the only fact to consider. The fees to transfer your money vary greatly between providers; it can be free, a set fee, or a percentage of your transfer.
So, an attractive exchange rate does not necessarily mean you will get more money. For example, a forex provider might charge a zero-transfer fee but the exchange rate might be lower.
On the other hand, others might promote highly favourable exchange rates but charge higher transfer fees on top.
Beware of mark-ups
Banks and money transfer services use the mid-market rate when they trade between themselves, but they rarely pass it on to you. Instead, they often mark up the rate to make extra money.
Look online for the mid-market rate, also known as inter-bank rate. This is the real exchange rate that banks use to transfer money between themselves and is found on Google Finance, Yahoo Finance, Reuters, XE and TransferWise among others.
So by knowing the mid-market rate, you can compare and contrast, by spotting the ‘true rate’ and seeing right through popular offers of a 'zero per cent fee', 'zero commission' or 'our best rates'.
Since VAT or Value Added Tax has been introduced in UAE, the remittance will be levied at the rate of 5 per cent on transfer fee and other commission charges for all products and services offered across UAE region. So consider that as well.
Be aware of seemingly hidden fees
Apart from mark-ups, it is important to find out if there are “little extras” that the service provider is tacking onto the bill.
Remitting to some countries, like the Philippines, a source of profit for exchanges is a certain ‘back-end’ fee, which, depending on where the money is being sent to, can cost 40 per cent of the transaction charge.
A Filipino expatriate sending money home, for example, may be asked to pay Dh15 for the transaction in the UAE, but once the money is delivered, an additional Dh10 is collected (backend fee).
The sender sometimes does not realise it since it is broken up into two parts— fees charged in dirham and back-end fees charges in pesos in the Philippines.
Experts say it costs typically Dh15 – Dh25 to send money to South Asia, but charges for Europe and North America can be around Dh60 or even higher – so you should shop around for the best deal.
Make use of an exchange fee calculator
With several free options available online, you can use one of these calculators to see how much money you’ll get on the other side, after your remittance.
The calculator subtracts the fee and charges and applies the exchange rate and compare that to the amount you would get with your bank, and other services, and see which leaves you with the most money.
Check transfer policies of the agent
When you make transfers ensure you read the fine print in the transfer document, to know the refund policies and other liabilities of the transfer to avoid losses due to negligence.