5 Things You Need To Know About Foreign Exchange
There are plenty of reasons why you may need to transfer money overseas, be that for supporting family members abroad, transferring your pension, or even for purchasing property abroad, the list goes on. While making a transfer with the bank may seem like the easiest option, it could be a costly one. Here’s five tips for getting a great deal on an international money transfer, minus the expensive bank fees.
1. Be aware of global events influencing the value of the pound
When it comes to sending money overseas, you may be surprised by how much events like Brexit, or the trade war between the US and China influence the rate you use to transfer money to Europe or the US for example. The markets are prone to respond (often unpredictably) to large-scale world events.
So if you’re looking to transfer money, it makes sense to keep on top of the news and keep informed of events both here in the UK and abroad. If your desired currency is looking favourable, then it may be a good time to consider making a transfer, and vice versa.
2. Don’t be fooled by the ‘market’ rate versus the ‘customer’ rate
The ‘market’ rate shows up when you google the conversion rate between certain currencies. It’s the rate that the big banks use to send money between each other. It’s extremely rare that a bank or other financial institution will offer that rate to customers looking to make a transfer. Instead, they’ll use what’s often called a ‘customer’ rate, which typically adds a margin on top of the market rate.
The thing to watch for here, is how much of a margin is being added. For the big banks, the margin is often much larger than a specialist foreign exchange service. Be sure to do your research and compare customer rates – as it will be the real measurement of how much you can save on your transfer.
3. It’s hard to believe but shopping can save you money!
With such a highly competitive market, gone are the days when you have to use a bank to make a transfer. There are several non-bank providers in the market. In fact, you’re more likely to save money when you use a foreign exchange specialist. Not to mention, specialised services can typically offer tools that are designed specifically to save you money when making an international money transfer.
4. Look out for the hidden fees
Along with a higher margin, banks, and even some foreign exchange providers, will have several ‘hidden’ fees when making a transfer with them. It’s worth asking questions to understand and compare fee structures as some vary depending on the amount and currency that you’re sending. The best option is to find a provider that either offers a low, flat-fee that’s very transparent throughout the whole process, or no fees at all.
5. Make currency rates work for you
The advantage of choosing a specialised foreign exchange service is the offering of tools that help you take advantage of currency movements. Take OFX for example, by offering tools like a Forward Contract or a Limit Order, it essentially allows you to lock in ideal rates, using them to transfer later. This means you don’t need to worry about sudden fluctuations as you’ll know exactly what you will pay for your chosen currency. You can also use rate monitoring tools like Market News, Rate Alerts and even an app to monitor rates on the go. You may be able to take advantage of a great rate right there and then.
Whether it’s your first international money transfer, or you’re simply looking for new ways to help you save money, there are many ways to ensure you’re saving as much on your foreign money transfers as possible.
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