Fluctuations in currency rates can make a huge difference in the amount of money you end up with when buying/selling property overseas, moving abroad (or coming back home), paying pensions or tuition fees, etc.
Because an exchange rate can move by as much as 10% over the course of a few days, it’s extremely important regardless of your needs, be they large or small to find the best options to move your money safely, efficiently and quickly across borders.
The difference between banks and brokers
Foreign exchange brokers specialize in transferring funds internationally for clients. As this is their sole business, they focus on getting clients a rate that is as close to the interbank (most competitive/lowest) rate as possible, whilst reducing or eliminating transfer fees and giving clients access to valuable products that can protect them from negative exchange rate movements in the future.
Most brokers quote their exchange rates based on the live interbank rate at the time you call them, whereas many banks set their rate first thing in the morning and hold this rate for a certain amount of time. The banks have to set this rate far enough away from the interbank rate so as to cover any potential fluctuations throughout the day. The closer you get to the interbank rate the better, so if your quote is based on the live rate (as with brokers) you are more likely to achieve this.
Key benefits of a foreign exchange broker
- Better exchange rates than the banks
- Regular savings of between 0.5% and 4% on the amount of your transaction
- Faster international payments (same day)
- Possibility to fix the rate for a date in the future (Forward Contracts)
- Protection from negative rate moves (Currency Options)
- No commission and heavily reduced transfer fees
- Your own dedicated consultant
- Regular transfer system and online payments
- Please note that some of these products or services may not be available through all foreign exchange brokers.
Choosing the right broker
There are many foreign exchange brokers to choose from, but for additional peace of mind it helps to use a broker that is authorized and regulated by the Financial Services Authority (FSA) or its American counterparts the SEC or FDIC. Brokers regulated by these financial entities are required to safeguard client funds by either segregating client money or having appropriate insurance in place to cover loss. By keeping clients’ money separate from the bank accounts they use to run their business, clients have extra protection should anything happen to the company.
It is always worth speaking to a broker to compare their rates against the bank and to find out what additional options may be available to you for your transfers. It is advisable to consider foreign exchange quite early on. That is, as soon as you realize you will need to make a transfer at some point in the future.
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