International Money Transfer

By: James Smith 1 

A currency is a unit of exchange, facilitating the transfer of goods and/or services. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value. A currency is the dominant medium of exchange. To facilitate trade between currency zones, there are exchange rates, which are the prices at which currencies (and the goods and services of individual currency zones) can be exchanged against each other. The foreign exchange (currency or FX) market is where currency trading takes place. FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. Today FX market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. International Money transfer is an essential part of your international move and/or business, which, if handled correctly can boost your bottom line or settling funds dramatically. Anybody looking to move overseas send money to family or conduct business with an overseas company will need to purchase or transact in the destination currency. In order to complete any property acquisition ahead of your move or just simply transfer your existing assets over to your new country, the method you choose will make a big difference.

In today's volatile currency markets, a small change in the currency rates, coupled with the high commission charged by most banks can make an enormous difference in the net currency amount received when converting your currency, you are placing into someone else’s hands. Depending on the size of transaction, this could make a tangible difference of several thousand dollars; money you may prefer to put towards starting your new life! This can leave you exposed to the market fluctuations and could give you a handsome boost to your funds or put a big hole in your budget.

To start with you have several choices how you move your money: 

1. Use your normal Bank 
2. Use a specialist international currency transfer company 
3. Use a normal money transfer agent 
4. Buy a huge amount of traveler’s cheques or take cash 

When transferring money overseas the first effective factor to consider is the amount of money that is to be sent, as this can directly affect the method to choose for the transaction. Sending small amounts of money overseas means that the currency exchange rate will not be the most important factor in the transfer and one could save money by choosing commission-free or low-commission services which are fast and secure. Although the presence of a bank account on either end means that funds can be transferred through international wire transfers for a small transfer fee and usually commission-free, the bank-to-bank transfer of money can take from 1 day to several weeks depending on the service you choose. You will have a choice of wire transfer (1 day to complete, most expensive), cheque (5-7 weeks and relatively expensive), Foreign Draft (3 weeks and relatively cheaper) and money order (5 days and quite cheap). When sending a cheque abroad the recipient will need to pay the processing fee and it will take about 4-6 weeks. Even though it’s easy to issue a cheque to transfer money overseas, it may not be easy for the recipient to cash the cheque, especially with some countries having banking systems which tend to be less welcoming towards foreign-drawn cheques. While bank transfers may not provide for the most cost-effective international money transfer method, they have the advantage of being able to transfer money overseas to almost all countries, a limitation set by many other services. 
This all was possible with the presence of a bank account on either end, but many cases of international money transfer do not actually involve a bank account on either end. For such types of transfer, i.e. cash transfers, customers must refer to international money transfer companies such as Western Union, Money Gram, and Travelex etc.

Western Union is known to be the leading services for international money transfer where there is need to transfer money overseas in cash or without involvement of a bank. In Western Union customer takes cash to a local money transfer agent, fills-in a form detailing the recipient’s name and the destination country, and pays the money to the agent. This agent will then inform the recipient agent about the money transfer providing them with the same transaction code given to the payee. Meanwhile the payee will have contacted the payment recipient and provided him/her with the transaction code. This code is then used by the recipient to collect the money from the money agent residing in the destination country. The whole process could take as little as 20 minutes depending on the two countries. Although Western Union is known to be a very fast and secure international money transfer service, it is also known to give customers a relatively poor exchange rate as well as having high-rate commissions. Another such service of money transfer is Travelex, it is the world’s largest non-bank foreign exchange payment company serving over 29 different countries. Countries include United States of America, Canada, United Kingdom, Malta, Netherlands, Belgium, Germany, Switzerland, Finland, France, Czech Republic, Italy, Bahrain, Oman, Hong Kong, etc. About 40 percent of the world's airline passengers now pass through airports at which Travelex operates its retail foreign exchange branches, including the major gateways at London, New York, Hong Kong, Frankfurt and Sydney.

Recently, these companies have introduced a good online service that provides for estimating the transaction costs as well as making it possible to transfer money overseas through their websites and online. This has also eliminated the need to pay-in by cash, where credit/debit card payments have also become an alternative.

All the above companies tend to pose restrictions on the amount of money that can be sent per transaction, although it is highly discouraged to send large amounts of money overseas through these companied due to the poor exchange rates they give their customers. Alternatively, in the case of large transfers, it is suggested to transfer money overseas through Forex Brokers.

All the services and companies mentioned above are known for giving their customers substantially poor exchange rates and hence less value for money. A single percentage of difference in exchange rates would mean hundreds of thousands of dollars of difference in the final price, where large amounts of money transfer are in place. 
In such cases it is best to refer to specialist international currency companies that are part of the forex who usually tend to provide better exchange rates, generally commission-free, due to their competition with the leading dealers in the foreign exchange market (Forex). 

Article Source: ABC Article Directory


The Article is written by CurrencySense.Info - which offers international currency transfers and currency exchange. You can learn more about currency transfers, Pounds to Euros exchange, Dollars to Euros transfer and Currency exchange. visit www.currencySense.info for more information. 

Mathematics in Banking – Compound interest

By: chandrajeet 

NO banking WITHOUT Mathematics.

Many of you would have learned about Simple interest and compound interest in your middle school. Simple interest is seldom used in practice. The concept of compound interest is used in banks and many financial institutions.

Let’s begin with the definition of “interest”.

Interest is a fee paid for a loan or an amount of money borrowed from a bank or other financial institution. Banks pay interest on money deposited by customers.

There are two types of interest, simple interest and compound interest.

Simple Interest

Simple interest is the interest paid only on the original principal. Simple interest is quite easy to calculate. 

The simple interest formula is I = PRT

Where 

I – simple interest
P – Principal or the initial amount of money that was invested or borrowed
R – Rate of interest as a decimal
T – Time

Compound Interest

Compound interest involves paying interest upon interest. That is, compound interest is the interest calculated on the accrued unpaid interest and on the original principal.

Compound Interest is a bit more complicated than Simple Interest.

The compound interest formula is:

A = P (1 + R) ^T, if the interest is compounded once a year

A = P [1 + (R/N)] ^NT, if the interest is compounded ‘N’ times a year

Where 

A – Amount = Principal + interest
P – Principal or the initial amount of money that was invested or borrowed
R – Rate of interest as a decimal
T – Time

When you deposit money in the bank, always choose the account that offers you compound interest. You would make a little more money with the compound interest account than the simple interest account.

Albert Einstein, the great scientist once quoted: "Compound interest is the eighth wonder of the world. He, who understands it, earns it ... he who doesn't ... pays it”.

Let’s look at a couple of examples:

Mrs. Green deposited $5000 for 5 years at 4% simple interest. Calculate the amount of interest Mrs. Green will get back at the end of 5 years.

Let’s use the simple interest formula: I = PRT

Here: P = $5000, R = 4% = 0.04, T = 5 years

I = PRT = 5000 × 0.04 × 5 = 1000

So, Mrs. Green will receive $1000 at the end of 5 years.

Mrs. Green deposited $5000 for 5 years at 4% compounded quarterly. Calculate the amount of interest Mrs. Green will get back at the end of 5 years.

There are 4 quarters in a year. So, the interest is compounded 4 times a year.

Let’s use the compound interest formula: A = P[1 + (R/N)]^NT

Here: P = $5000, R = 4% = 0.04, N = 4, T = 5 years

A = P [1 + (R/N)] ^NT = 5000[1 + (0.04/4)] ^ (4×5) = 5000(1 + 0.01)^20 = 5000(1.01)^20 = 6100.95

So, Mrs. Green will receive $6100.95 – $5000 = $1100.95 at the end of 5 years.

Notice that Mrs. Green makes a little more money with compound interest.

Banks and other financial institutions use compound interest to calculate how much interest to be charged on a loan amount and how much interest to be paid on money deposited by customers.

The more frequent the compounding, the more money you can make.
The longer you allow your money to remain in the account, the greater is the final amount you receive.

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Article Source: ABC Article Directory


I’m Chandrajeet, an in-house writer for iCoachMath. iCoachMath is an effective, convenient, easy-to-use online Math Program which has been used by thousands of students, teachers, and parents. iCoachMath strives to lead K-12 students to excellence in math by offering quality web-based educational solutions. iCoachMath’s instructional and lesson materials are aligned to State Curriculum Standards in all 50 states (USA).
www.icoachmath.com”>iCoachMath