What do you understand about the term international money transfer? Transferring money from one country to the other for family needs, financial assistance, business operations etc. All international money transfers involve selling one currency to buy another at a specified exchange rate. When you transfer money online from Australia to Sri Lanka, during the process you have to sell Australian currency to buy Sri Lankan currency to complete overseas transactions. Into this process, comes the role of mid-market exchange rates. Let us see what it really means!
The mid-market exchange rate (middle or interbank rate) is the exact middle point between the buying and selling prices of the currencies at a specific time. It is the halfway of the exchange rate between:
- Currency’s Bid Rate: the highest price the buyer is willing to pay for the currency.
- Currency Ask Rate: the lowest price the seller is willing to accept.
The mid-market exchange rate is calculated with the formula:
Middle rate = (bid rate + ask rate) ÷ 2
This means that the middle rate is the median (midpoint) of the bid and ask (offer) rates.
The mid-market exchange rates are in continuous flux depending on the various factors of national economies, demand and supply, currency inflation and depreciation etc. Mid-market exchange rates are the most accurate price at which currencies are sold and bought for all kinds of transactions.
However, this accurate pricing of mid-market exchange rates will not be equal to the exchange rates offered by the banks and other remittance providers. Because each sets their own exchange rate margins to gain some profit from the international money transfers. This is why different service providers and banks offer different exchange rates. These variations can be very slight, say by 0.1% or as high as 10%, depending on the policies of each service. Therefore, it is very important that you compare and contrast the exchange rates offered by different remittance providers and banks to see which one can hook you up with better deals that would come for your benefit.
Anyone who wishes to save big money on international money transfers must go for the service providers whose exchange rates are closer to the mid-market exchange rates. The closer you are to the mid-market exchange rate, the more money gets delivered on the other end into the hands of the beneficiary. So, pick an online money transfer in Australia that extends favourable exchange rates that comes to your advantage.