If you find it necessary to send money overseas, you might be shocked by the poor exchange rates and expensive transfer fees offered by domestic banks. A foreign exchange or currency broker can be a much better option. Property buyers have an increasing number of choices available to them, and can look to specialist online foreign exchange companies for competitive exchange rates and more flexible and inexpensive international money transfer options. They often charge no fees, despite their packages being so much more competitive than those offered by banks. If you’re considering using a foreign exchange broker, here’s how they work.
Set Up an Account
The first step is to register with a broker so that they can set up an account. A discussion with a dealer will usually take place at the point, to discuss the transfer. If you are satisfied with the costs and exchange rate, you will book the transaction and provide details of the recipient’s account. Payment of the agreed amount will usually be made via an electronic transfer from your UK bank account.
When the broker receives the funds, they will electronically send the currency to the beneficiary. The whole process will be completed within one to two days. Popular currencies, such as euros and US dollars generally take the least time to be transferred.
Transfers over £3000 will not usually incur a fee, and the exchange rate will be more competitive than those offered by high-street banks. Banks also tend to charge a fee on top, which can be as high as £40. On average, people sending 10,000 euros save £480 by choosing currency brokers.
Types of Transfer
By using a foreign exchange broker you can also benefit from exchange rate movements. Three types of transfer are generally offered, allowing you to choose the one which best suits your needs and time scale. The quickest and most straightforward is called a spot deal. It sends the funds immediately at that day’s exchange rate.
For those who have the luxury of not needing to immediately dispatch funds, a ‘forward contract’ can be highly beneficial. A forward contract allows you to ‘lock’ the day’s rate, even though the money transfer is made at a later date. This allows you to shield yourself from the negative effects of fluctuating exchange rates, and makes it easier to budget your outgoings as you know the exact cost of your transaction.
Put Down a Deposit
The exchange rate used in a forward contract is calculated by adjusting the current rate for so-called ‘forward points’. This means that it is not the same as the current exchange rate. The broker should explain to you the terms and conditions of the contract, to make sure that you understand how it works and how much you pay.
The full price of a forward contract does not need to be paid up front, but a deposit will be required, with the remaining capital due on the transfer date.
A limit order is a second way to play the currency markets. With a limit order, you specify your ideal exchange rate to the broker. When that target rate is triggered, the dealer has the power to transact on your behalf. This ensures that you get the best possible exchange rate when you have to make an overseas mortgage payment.
If you pay a foreign mortgage, school fees or need to make any other type of regular payment to an overseas recipient, a foreign broker can usually arrange this for you. The minimum payment tends to be around £500.
When sending money overseas, security is absolutely paramount. All brokers should be authorised and regulated by the Financial Conduct Authority. The firm should be operating within specific guidelines to safeguard their consumers. To ensure that you have your money returned to you if something goes wrong, look for firms offering the protection of the Financial Services Compensation Scheme.
The cost of international money transfers varies from broker to broker. Take a look at InternationalMoneyTransfers.org – the ultimate money transfer comparison site to discover more about the offering of each broker and make most of your money.