Going abroad or planning a foreign currency transaction? Don’t let your funds evaporate. Read these tips to fdind the best foreign exchange rate.
When exchange rates are in our favour, we sometimes get careless about changing our hard-earned cash into different currencies.
Only a few years ago, many of us would change our Pounds into Euros at the airport before heading to the continent.
We wouldn’t exactly get the best currency exchange rates, but because the Pound was strong it was really cheap to eat, drink, sleep and travel at the other end.
So we rarely bothered to save extra money by hunting out better rates of exchange or lower commission.
All that has changed. These days, holidaymakers from across the world flock to Britain to take advantage of the weak Pound, particularly after the Brexit vote, and we attract increasing numbers of foreign investors who want more bang for their buck (or Yen, Euro or Rouble).
That’s great news for some, but it can get expensive if we want to go on holiday ourselves, or perhaps buy property or invest in a different country. So it’s more important than ever to get the best currency exchange rates you can.
Top tip: opt for the currency exchange margin
If you want to find the best currency exchange rate deal, it’s usually a good idea to avoid bureaux de change or similar services that charge expensive rates of commission.
They can be useful for getting your hands on some holiday money fast, but they are quite expensive – especially if you need to change relatively large sums.
Instead, you can choose to exchange your currency with a bank or currency exchange broker and pay them a currency exchange margin rate – an extra charge that’s passed on to you as a customer.
The currency exchange margin is the way banks and brokers make money from the transaction, and it usually works out at a lot less than the commission fee charged by bureaux de change on your holiday money.
How do currency exchange margins work?
Currently the interbank currency exchange rate stands at 1.1324%.
If you then went to a bank and were given an exchange rate of 1.1049, the margin rate would be the difference between the two figures.
1.1324% – 1.1049% = 0.0275%
As you can see, the currency exchange margin is 0.0275% – the money you will pay over and above the interbank currency exchange rate.
However, if you then went to a currency exchange broker and got an exchange rate of 1.13%, the margin rate would be lower.
1.1324% – 1.13% = 0.0024%
Getting a favourable margin rate can save you thousands. If you needed to transfer £150,000 into Euros to buy a house in Spain, you would have got €3,765 extra by going to the currency exchange broker – €169,500 instead of £165,735.
Who offers the best currency exchange rates?
It’s always a good idea to shop around, but as a rule of thumb specialist currency exchange brokers offer the best rates.
They do it by keeping their margin rate low – they tend to have lower overheads than banks and they specialise only in currency exchange. And that means you get a better deal for your money.
It depends on the currency exchange broker, but most have rules about the minimum amount of money you can convert – often in the region of £300. Some may charge a small handling fee for amounts less than about £500.
How do I find a currency exchange broker?
We’ve had great success with TorFX and would certainly recommend them if you haven’t used a currency exchange broker before. Their rates are excellent and they have great customer service.
But whoever you choose, keep an eye on those margin rates if you want to get the best currency exchange rates! They’re the secret to getting the top deals.