Whether you are sending money to a relative overseas, making a regular investment into a foreign account or purchasing property in another country, getting the best rate when you exchange currency is crucial.
Many people may automatically assume that they will have to go to their bank to conduct any transactions but foreign currency brokers offer an alternative service which might be worth considering.
Here’s what you need to know to save money on your foreign currency needs.
Familiarity doesn’t necessarily mean the best
You may be very comfortable with the idea of popping down to your local bank branch to arrange for a foreign currency transfer. But have you ever stopped to wonder whether you are getting the best deal?
There are many other ways to arrange for money to be sent overseas and your bank will not necessarily be offering you the best deal. The reason for this is that they are not experts; foreign currency transactions will in all likelihood make up just a tiny proportion of their daily business.
This means that as they do not have the volume, they are unable to pass on the best rates plus they often lack the detailed knowledge that only comes with working with foreign currencies all day long.
The other thing to consider is the rates you will be charged by your bank. Whether you are making a one-off payment or setting up a regular transaction, the rates you will be charged will be automated rather than tailored to your individual needs. This is unlikely to result in you receiving the best deal.
Opt for an expert
A foreign currency broker deals with overseas transactions all day, every day and handles large volumes of business. And it is this bulk which allows more competitive rates to be passed on to the customer. As a rough estimate, savings of between 1-5% can be made on the rates offered by a typical high street bank.
However, preferential exchange rates only tell half the story.
A foreign currency broker will not offer a flat exchange rate, but instead recognising that the market is more fluid. Customers who are conducting large transactions will often be able to benefit from even cheaper rates, once again reaping the reward for volume. And in the majority of cases, transactions can be carried out free of any charges, a marked difference to the fees which the majority of banks are forced to pass on to customers.
When you sign up for an account with a foreign exchange broker, you are immediately tapping into a wealth of experience, with an expert ready to provide advice and guidance with all your currency needs.
And with your own personal account manager, you can put together a far more tailored currency plan to help you get the most out of any fluctuations in the market. If you are not in any immediate hurry to make the exchange, you can arrange for your account manager to monitor market conditions on your behalf and let you know when conditions are right to make the exchange.
Alternatively, if you are offered an exchange rate which you want to accept but are not ready to conduct the transaction, you can secure the rate for use at a future date.
All reputable foreign currency brokers are authorised and registered with the Financial Services Authority (FSA). If you want to check yourself, the FSA have an online register which members of the public can search for free. Knowing that a broker is registered with the FSA provides you with the peace of mind, the reassurance that your money will be held safely and securely and in accordance with regulations that all financial institutions must comply with.
Conducting a foreign currency transaction should be so much more than simply looking around for the best rates and lowest commission. By using currency brokers/online providers you will not only be able to save money but you will also receive a personalised and tailored service, allowing you to squeeze every last penny out of your cash at a time that is right for you.
Image Credits: Francois Maillett and Ed Yourdon.