Where do you find the best exchange rate?

Most people usually think of traditional institutions like the bank when it comes to transferring money overseas. However, your high-street bank offers foreign exchange as a branch of its services, rather than its sole specialty. Other currency providers such as brokers, specialise in currency, meaning you can conduct your transfer with an industry expert by your side.

What’s more, most brokers offer you a dedicated point of contact, meaning you’ll never have to worry about speaking to multiple people at a call centre, again. You can phone your account manager to discuss your requirements and they can offer you specialist market insight to help you decide when the best time to transfer might be. With some brokers, you’ll be able to avoid transfer fees entirely and you might notice that the exchange rates are better too. This is because brokers can be more competitive and offer rates closer to the interbank rate (the rate brokers and banks buy and sell currency for).

Charges explained

If you’re shopping around for currency providers, make sure you ask if there are any charges to be aware of, such as transfer fees and commission costs. It’s also worth checking whether your overseas bank may apply a charge once they’ve acknowledged receipt of the funds. Not only can a few digits in the exchange rate make a difference to the amount you receive, but these extra tagged-on costs can make your exchange rate even less appealing.

Commission costs and other fees

Every currency provider will make money on your currency transfer, the question is, how much? While some providers will say that their rates are commission free, you may find their exchange rate isn’t as good as others which makes up for it. They may even charge you a transfer fee on top!

Ideally, you want to utilise a company that offers you an exchange rate as close to the interbank rate, as possible. Some brokers are so confident that they can offer you a great rate, they’ll even give you a Best Exchange Rate Guarantee. So when you look to make your transfer and are finding quotes, make sure you’re taking into account how much it’s going to cost you including commission, charges and any other expense, so you’re getting an accurate quote.

This can be especially important if you’re transferring money abroad regularly, because a fee each time is soon going to add up.

Exchange rates never sleep so you’ll find that a rate you check one day, may be drastically different the next. If you’re comparing quotes, make sure you do it at the same time to avoid any inaccuracies.

What can affect an exchange rate?

Exchange rates fluctuate on a host of different factors including economic data, political developments, central bank announcements, commodity prices, and even things like terrorism, war and natural disasters. An industry expert can help you manage your money even in the most volatile times, but what can affect the amount of money you get when you make a transfer?

  • The timing of your transfer – If you’re planning to move money overseas in a year but like the exchange rate now, a reputable broker can lock-in an exchange rate for you to use up to two years in advance.
  • How much you transfer – The bigger the amount you move, the more you’ll notice a difference.
  • The market – If you’re transferring at a time when there’s extreme volatility, you may find your chosen currency pair makes some dramatic movements. Don’t forget, it’s never too early to plan ahead.
  • Your currencies – Dependent on how your chosen currency is performing depends on how much currency you’ll receive when you make your transfer. Your currency can be affected by any of the points mentioned above.

Finding the best rates

When you look for a great rate, ensure you compare your high-street bank to a currency broker and see how much of a difference it makes on a large-scale transfer. A few digits may not seem like a huge variation, but when it’s on a large amount of money, it can be the difference of thousands.

Brokers usually offer a more personalised level of service and can help you plan your currency transfer strategically, to make the most of your money. Whether you’ve got a short time frame or a long window to transfer, they’ll be able to offer you guidance through the market and help you make the best decisions for your individual requirements.

Some brokers can even fix an exchange rate in place for you to ensure that you’re still able to keep your funds secure, even if negative market shifts take place. Your dedicated account manager will be able to talk you through factors that may influence your exchange rate and can keep you in the loop of any market movements, meaning you have one less thing to worry about.

How much will you normally save using a currency broker?

Once you’ve got a quote from a broker and a bank, you can really see how much of a difference your exchange rates make.

For instance – if you were offered a pound sterling to euro (GBP/EUR) exchange rate of 1.18 by a broker, you’d receive €354,000 when you transferred £300,000. However, if a bank offered you 1.15, you’d only receive €345,000. Not only would you have €9,000 less, but you may also have to pay extra transfer fees too. (I took a figure from Barclays yesterday for this.)

How long does it take to transfer money?

Many brokers can offer same day or next day currency transfers to help you receive your funds swiftly. By organising your overseas money transfer before you go, you’re able to ensure your money will be ready for you to spend, as soon as you step off the plane! However, with some currencies, it may take a few days longer which your account manager will make you aware of. Your dedicated point of contact will keep you updated every step of the way, so you’ll be notified at each stage of the process.

How safe is a broker?

When you choose a broker, ensure they have Financial Conduct Authority (FCA) credentials. If your broker is an authorised E-Money Institution, you’ll find you can be offered more flexibility with the services available. FCA authorised institutions are required to keep client funds in segregated accounts.

How important is timing?

Timing, is everything. Ensuring you register with a broker sooner rather than later means you’ll have more choices when it comes to your transfer. For example, if an exchange rate jumps to multi-month highs six months before you’re due to move overseas, you may want to take advantage of that rate and lock it in. Your currency specialist will be able to talk through your needs and requirements and find the best way to maximise your transfer.

For instance, locking in a pound sterling to euro (GBP/EUR) exchange rate ahead of the UK’s EU referendum could have resulted in a difference of thousands. In June 2016, you might have been offered a GBP/EUR rate of 1.30, giving you around €390,000, whereas two weeks later in July, it may have dropped to 1.16, resulting in only €348,000. That’s a difference of €42,000 in just two weeks.

Choosing a currency specialist

When you finalise your choice of currency provider there’s just a few key points to bear in mind:

  • Have you chosen an FCA authorised company? Are they an E-Money Institution?
  • Will your money be kept in a segregated account?
  • How established are they in the market? How long have they been in business? How happy are their customers on Trust Pilot, etc.?
  • Do they use SWIFT – the global provider of secure financial messaging services?
  • Is the company registered by the Commissioner’s Office under the Data Protection Act (DPA) 1998

Article contributed by FC Exchange
FC Exchange is a world leader in offering expert and convenient currency exchange services to both business and individual clients. Learn more about them at this link.