If you’ve been transferring money internationally for some time, it may have come across your mind to automate the process. Life can get busy and it is surprisingly easy to forget to send off that regular money transfer, especially if it gets stuck on the end of a long to-do list.
A recurring payment is a smart way to arrange a schedule of regular transfers. It can not only save you time but also help you become organised and remain headache free when keeping on top of your day-to-day obligations.
In this post, we’ll take a look at the recurring payment, explain why it’s useful, and find out which money transfer services offer them.
What is a recurring payment?
A recurring payment is a currency transfer which you intend to complete on a regular basis. If you often make a transfer to a particular person or business, a recurring payment can be used to automate this process. That way, instead of having to manually complete the transaction each time, your schedule will automate the required payments in the value and on the date of your choosing.
Just about any type of transaction can be scheduled as a recurring payment. As long as you know how much you want to send, and how often you want to send it, you can schedule your transfer so the funds are delivered to your recipient on time, every time. Some of the most common types of recurring payment include:
- Mortgage repayments
- School and university tuition fees
- Remittances to family and friends at home
- Retirement pensions
At its core, a recurring payment is essentially an automated spot contract. And while all money transfer services offer spot contracts to a degree, not all allow you to automate the process. Some will permit you to make a repayment with a few clicks, but for those who want less to worry about at the end of the day, the recurring payment will truly allow you to set and forget.
When is an automated regular payment useful?
Banks and other financial institutions have long allowed you to arrange an automated payment. But as the presence of money transfer services has grown, they have also added this functionality to their products. This is good news for everyone, as money transfer services can save you a significant sum of money when compared directly with banks.
While a recurring payment has obvious benefits for scheduling transfers, there are other uses. An automated payment can also be used as a basic hedging strategy, allowing you to average out the cost of acquiring a currency over time. This is particularly a helpful tactic for acquiring large amounts of currency, as it limits the overall effect of foreign exchange volatility.
For example, let’s say that you had £100,000 and you wanted to exchange this into US Dollars. If you decided to exchange the whole amount at once, your transfer would be subject to today’s spot rate. Now, you have no idea how the currency has performed recently, so you really are exposed to the current state of the market. Instead, you could use a recurring payment to transfer smaller parcels and average out the rate over time.
Practical examples of a recurring payment in action
Below, let’s take a look at how a recurring payment can be used for an automated regular payment. I’ll provide three common use examples.
You’ve sent your daughter to a university in Australia (lucky girl). The university requires that tuition is paid every quarter in the amount of AU$ 5,000. You instruct a money transfer service to exchange the equivalent of this amount every three months. To ensure that each payment is successful, all you need to do is make sure your local currency balance is sufficient to accommodate.
Remitting your salary back home
You moved to the United Kingdom for a new job and now remit part of your salary back to your family at home. You instruct a money transfer service to exchange £1,000 into your home country’s currency every month. From each month thereafter, the equivalent of £1,000 is paid into your family’s bank account at the spot rate of the date that each recurring payment is made.
Transferring life savings
You and your wife have decided to move to Spain for your retirement. You have £1,000,000 in savings and wish to transfer this to your new Spanish bank account. Instead of transferring the entire amount at once, you decide to make quarterly payments of £83,333 over the next three years, to average out any volatility in the exchange rate over this time.
Which services provide an automated payment feature?
Here are the money transfer services that allow you to set up an automated regular payment:
|wdt_ID||Service||Ave. cost||Speed||Countries||Our score||Review|
|1||CurrencyFair||0.45%||2-4 days||157||5 stars||Read review|
|2||XE Money Transfer||0.54%||2-4 days||220||4 stars||Read review|
|3||WorldFirst||1.11%||2-4 days||243||4 stars||Read review|
|4||OFX||1.20%||3-5 days||226||4 stars||Read review|
|6||OrbitRemit||0.43%||1-3 days||43||4 stars||Read review|
|7||Ria Money Transfer||3.06%||1-3 days||158||2 stars||Read review|
|9||WorldRemit||1.35%||1-3 days||132||4 stars||Read review|
|10||TransferGo||0.84%||1-3 days||56||3 stars||Read review|
|11||TorFX||2.12%||2-4 days||176||3 stars||Read review|
|12||Currencies Direct||1.79%||2-4 days||188||3 stars||Read review|
How to set up a reoccurring payment
The process of setting up an automatic payment is slightly different for each service. While some allow you to set up a schedule of payments using their online platform, many will require that you speak with a customer service person to organise this over the phone.
Whichever the case, the basic process is as follows:
Step 1 – Contact your service
Let them know how much you want to exchange, where you want the funds sent, and how often you want this to occur. You’ll need your recipient’s bank details on hand, so you can provide all the information required.
Step 2 – Provide instructions
Once you’ve provided the details you’ll need to provide your final authority to proceed with the recurring payment. In essence, you will be contracted to pay the money transfer service the agreed funds until the payment schedule lapses or the transaction is cancelled.
Step 3 – Send in your funds
Before any money transfer service will exchange currency on your behalf, you’ll first need to ensure that you have a sufficient balance in your payment account. This could involve having a service hold a deposit in trust, or you schedule a payment from your bank account into theirs.
Step 4 – Cancel when no longer required
If a recurring transfer is cancelled, a money transfer service will cease to complete any more payments on your behalf, and return any balance of funds that they hold.
A recurring payment is the best way to automatically schedule currency transfers into the future. This is very useful for meeting regular obligations such as an international mortgage, school tuition fees or pension payment. In addition to being convenient and time-saving, a recurring payment can even be used as a natural hedging strategy to combat against fluctuating foreign exchange rates over time.
If you have any questions or feedback, let me know in the comments below.