Free Online Course in International BusinessElectronic Funds Transfers FeesElectronic funds transfers (also commonly known as wire transfers) are a quick and effective method of transferring larger sums of money between buyers and sellers, particularly when the buyer and seller are located in different countries. Banks rates vary, usually as a percentage of the transaction, and can be 1% to 3% of the transaction or a flat fee agreed upon with the customer.Foreign Exchange FeesSince this discussion is focused on international transactions, it is unlikely that every party involved in the transaction will avoid an exchange of currency. Such will happen only if foreign currency accounts are held by the buyer and seller or the companies are related. In a situation where the companies are not related and are located in countries that have different currencies and the banks do not offer foreign currency accounts, a currency exchange will take place. As expected, banks charge fees for the exchange service as well as for the opportunity of reducing foreign currency fluctuation-related losses by offering forward and option currency contracts. The fees for these services will depend on the volume of currency being exchanged as well as the currencies involved in the transactions.Insurance PremiumsIn general terms, insurance is a transfer of risk from one party to another (an insured to a carrier) for a consideration referred to as a premium. A credit insurance policy specifically insures the extension of credit from one company to another by guaranteeing, according to the terms and conditions of the policy, that a seller will be paid either by a buyer or an insurance company.CoveragePolicies can be tailored to meet specific needs. A general coverage policy can cover shipments to buyers through various combinations of coverage:• blanket limits on all customers • coverage on specific customers for specific amounts • protection for larger accounts only where these customers represent a significant concentration of risk • for businesses with large numbers of small balance accounts Preset limits are structured around the credit rating of the Governing Mercantile Agency named in the policy (usually the credit rating agency used in the credit department or industry). This method demonstrates the flexibility of contemporary insurance policies by associating a table of ratings from the governing agency with predetermined limits of exposure. These agencies are either non-industry specific such as Dun & Bradstreet or industry specific such as Lyon's Furniture, Lumberman's Credit Association or Jewelers Board of Trade.
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