You may need foreign currency because you’re off on holiday, perhaps to pay bills or buy a property in another country or maybe because you are emigrating. But what options have you to get this money, here’s our currency exchange review to help.
For straight forward currency exchange you can turn to your bank, or if small value perhaps your high street or online bureaux de changes. You can also turn to specialist currency exchange brokers.
Currency exchange brokers are specialists and seek to provide the best possible exchange rates. Such brokers include companies such as TorFX, HiFX and International Foreign Exchange.
They offer commission fee transactions with exchange rates that are better than traditional banks.
Whilst a commission fee is not payable, these brokers operate on a foreign exchange margin. This is the amount added to the interbank exchange rate* when they quote a rate to you. The greater the margin the greater the cost to you.
As well as offering one-off payment facilities, currency exchange brokers can also arrange regular payments abroad for paying such as property maintenance bills or mortgages.
For example with TorFX you can set up for payments between £500 and £10,000 per month. Once such regular payments plans are set up you don’t need to do anything as the payments will be made automatically on your chosen day each month.
The brokers can also offer a forward contract to fix your exchange rate so that you can protect yourself for any drop in exchange rates that would otherwise cost you more. You may also need a time option whereby you can ‘draw down’ some of the funds before the defined payment date.
These options can be very useful as foreign exchange rates can change quickly and you can see a movement of 10% or more in a short space of time. If this movement should happen against you it could mean you are effectively paying 10% more than you originally budgeted.
If you don’t have any time restrictions on an exchange you can also opt for a market order, either a stop-loss order or a limit order, which will help ensure you get the most for your money.
*The Interbank exchange rate is the rate banks charge each other when trading large amounts. Currency exchange brokers and the high street banks buy their currency at wholesale exchange rates close to the Interbank rate.