5 Things to know before transferring large sums of money out of South Africa

Sending money offshore is a simple process. The surprizing thing is that many people waste large sums of money on fees that they didn’t know existed. Doing research and finding a transparent currency transfer specialist could save you thousands of Rands on transferring funds abroad now and into the future. Through this blog, we will provide information to you to empower you in your decision making, to transfer your funds abroad at the best possible rate with a trusted currency transfer specialist.

What should you know about international money transfers?

What are the available allowances and how to qualify for these allowances?

All ID carrying SA residents with valid tax numbers qualify for two types of foreign exchange investment allowances:

A Single Discretionary Allowance (SDA) – The SDA, allows you to send up to R1 mil offshore without a tax clearance.
2. A Foreign Investment Allowance (FIA) – The FIA allows you to send up to R10 mil offshore.

To utilise the SDA you need to be 18 years or older, with a green bar-coded ID book or Smart ID card and have a SARS tax number.  No tax clearance is required.

In additional to the above, you’ll need a tax clearance from SARS and available capital to make use of your FIA. This is used for exchange control purposes.

There are two main methods to transfer funds offshore

Through your local bank or through a currency exchange specialist.  Keep in mind that banks are not exchange specialists.

Through a currency exchange specialist you are often able to secure a more competitive rate of exchange. Even a seemingly small variation in the rate of exchange results in the difference of thousands of Rands on larger international currency transfers.

Fees involved in international money transfers

There are three fees noted on every International Money Transfer:

1. The Rate of Exchange
2. Commissions
3. Admin or Service Fees

As the Banks have to disclose these fees, you’ll always have a real indication of what they are.

The majority of people are not aware how the fees are calculated and end up paying fees that they were not aware of.   Your responsibility is to understand how these fees are calculated.

The answer is hidden in the rate of exchange. Forex desks do not have to disclose their mark-up on the rate of exchange.

This is called a “Margin” or “Spread” and is the difference between the Bank’s cost for the foreign currency and the price they offer it to you.

Banks buy and sell foreign exchange at an inter-bank rate.  This rate is not published live.

By marking this rate up without notifying a client the bank basically makes an unregulated and undisclosed profit on every single trade.

Without the knowledge of the inter-bank rate, do now know if you are paying a reasonable margin to the bank or other intermediary. None of us mind paying for a service however, we also expect fair treatment.

What is the rate of exchange?

In dealing with international money transfers, being familiar with the rate of exchange is key. The higher the rate of exchange offered, the better for you.

International money transfer specialists would be able to provide you with a regularly updated rate of exchange upon your request.

How to select an international money transfer specialist

Spend time to research and select the currency transfer specialist that you would like to partner with in the future. Building trust with your foreign exchange service provider is key to achieving the best possible rate on every trade.

Having a trustworthy partner is the first step in this process.

At Currency Assist we recommend choosing a transparent partner where you set the terms of engagement together.

Ask the right questions when you book your trade, including what the current inter-bank rate is and what spread you are paying.

Consider the customer service and treatment of their current clients. If you want to learn more, connect with us at Currency Assist.

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