If you want to send some money to another country, you might find the range of exchange rates quoted by your bank somewhat confusing.
Maybe you’re an entrepreneur and need to pay a supplier overseas, or you want to transfer money to a family member studying abroad - whatever your reason for sending money to an international account, you need to understand how the exchange rate for the transaction is set.
If it’s the first time you’ve needed to send money abroad, you might be wondering about the difference between telegraphic transfer (T/T) buying and selling rates.
Here’s everything you need to know.
Before you get started, a word.
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Now, back to what you came here to read.
Let’s start at the beginning. A telegraphic transfer - which is also often called a TT, telex transfer, or a T/T bank payment - is a broad term for transferring money from one bank account to another - usually involving moving the money from one country to another, and often between different currencies. If you’re sending money back to your home country, this payment might also be described as a remittance - but it’s basically the same thing.
When you look up the exchange rates used for TT payments, you’ll often come across a chart or set of figures which describe several different exchange rates. The ones we are interested in are telegraphic transfer buying (TTB) rates and telegraphic transfer selling (TTS) rates.2
The TTB rate is the rate at which the bank will transfer foreign currency to India, into INR for example.1 The selling rate is used when the bank is sending INR out of the country, and into a different currency.2
So for example- if you’re looking to make an outward remittance from India, and send money from your INR account to someone with a bank account held in a different currency, you need to know the selling rate (TTS). And if you’re expecting a remittance payment which has been sent from another country, the chances are that the rate applied will be the TTB rate.
Each bank will have its own approach to setting the buying and selling rates. To be sure of the rate that’s applied to your TT payment, you need to ask the bank directly. However, you can see how the buying rate is calculated by looking at the terms and conditions of your bank. Let’s take Union Bank of India, for example - one of the larger banks offering retail services.3
The Union Bank of India terms clarify that the buying rate that’s used is calculated by taking the base rate and reducing it by the bank’s margin, which is set at 0.025% to 0.080%.3 The calculation is rounded for ease, and this sets the buying rate applied.3 You can find the full details for Union Bank of India in the source linked below here, or check out the terms and conditions of your own bank, to make sure you’re happy with the way the calculation is carried out for your TT payments.3
If you’re new to telegraphic transfers, the terminology and processes can be a bit confusing. It’s a smart idea to read up to make sure you understand the way your money is being moved, and to make sure you’re getting the best deal. Here are some resources that might help.
- What is a telegraphic transfer?
- How do you make a telegraphic transfer?
- What kind of fees can I expect on telegraphic transfers?
- How long does a telegraphic transfer take?
- What’s the difference between a telegraphic transfer and a wire transfer?
Like many financial transactions, telegraphic transfers arranged by traditional banks seem to be awash with acronyms and technical language. That can be overwhelming if you’re new to it. Use this simple guide, and the resources we have picked out, to do a bit of research. Knowledge, after all, is power.
And while you’re doing your homework, check out other options for making international payments. You don’t need a degree in finance to understand a specialist services like TransferWise. The process is designed to be safe and simple - and could save you money.
http://nptel.ac.in/courses/110105031/pr_pdf/Module13.pdf (March 16, 2018)
http://importguidence.blogspot.co.uk/2010/06/tt-buying-and-selling-rate.html (March 16, 2018)
http://www.unionbankofindia.co.in/pdf/BELG_27_KYCAMLpOLICYExchangeRateMechnism.pdf (March 16, 2018)
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