Currency exchange is a notoriously expensive industry and working your way around the different options can be a bit of a minefield. There are a whole host of banks, supermarkets, bureaus and and brokers vying for your business and it can be tough for people that aren’t experienced to get their head around the options.
The two main things anyone should be interested in are:
- The transfer going through successfully with the funds being received promptly at the other side.
- The rate of exchange you receive when you book the trade.
Let’s be honest, what else matters other than these two things? Too many people worry excessively about currency transfer when in reality it is a very straight forward process with payments being received overseas within a few days. Because they worry so much, the majority of people go through their bank which is probably the biggest mistake they can make as it does bank balances no favour at all.
Anybody that is looking to send funds overseas should consider using a currency broker – and not just because the rate they are going to receive is likely to be superior.
- Forward contracts. A forward contract allows people to secure a rate at any given time allowing them to transact at this rate at a fixed date in the future. It is a great way to take advantage of a particularly favourable exchange rate without running the risk of it going against them. Banks and bureaus don’t tend to offer such contracts although currency brokers do.
- Set your rate. There is another handy facility available through some currency brokers that can be of massive help if you don’t need to set up your exchange right away. You can tell your dealer what rate you want to trade at and they can then call you once the rate has reached your target. Of course if you are too optimistic with the price you want, it might never be reached but they do change all the time, often significantly. If you target say, 5% better than the pair’s current rate, there is a good chance it will be reached, saving you a pretty serious amount of money.
- Rates. Not many people know it but currency brokers can often save you 4%+ of your total transfer over a bank. Typically a bank will take a spread of 4-6% on a transfer under £1m which on a £200,000 transfer is £4-6k. A broker will usually charge 1% max which on £200,000 is less than £2k. The best thing for you to do is sign up with a few of the big brokers and on the day you want to exchange, call them and your bank and you will be shocked to see the difference.
- Transfer speed. It is a common misconception that banks are the fastest way to complete overseas payments. Brokers are just as quick. The most time consuming part of dealing with a specialist currency exchange is often the registration process. If you not based in the country where the broker is based, or if you fail credit check, there is a good chance you will have to provide ID documentation. One you are registered though, it is possible to send money overseas within 24 hours.
In summary, if you care about your bank balance, you really should at least register with a minimum of one currency broker. Even if you don’t end up using their services, you will at least be able to see what they can offer that your bank doesn’t and compare rates. If you do end up using the broker, in all likelihood, you will never use your bank for FX again.