It may come as a surprise to find out that exchange rates between different banks and brokers can differ by as much as 4% on any given day. So to send a payment of €100,000, the cost could be as much as £3,200 more than you need to pay if you don’t take a few minutes to compare a couple of different exchange rates. All rates are based on the “mid-market” or “interbank” exchange rate, which is the rate you will see when checking online or in the papers, but it is impossible to actually buy your currency at this rate – the closer you get, the better the deal. Banks have differing policies on how far they will set the rate that you can buy at from this mid market rate, and sometimes they will only offer a “tourist” rate even for larger payments.
By using a currency broker, it is usually possible to achieve a rate much closer to the mid-market rate than a bank will be able to offer. In addition, specialist currency companies deal only in currency transfers, so their whole setup is geared towards better customer service, faster payments, and lower charges (banks charge up to £40 to send money abroad, while brokers will charge as little as £7, if anything).
Given the volatility of foreign exchange markets, it can also pay to have a currency broker on hand to monitor rates for you. If you have a dollar payment to make but have some flexibility on timing, most currency companies will offer to monitor rates and alert you to any movements in your favour. This can provide a further saving, specially given the current uncertain conditions in financial markets.
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In the UK, using a currency company is also safe, as the industry is regulated by the FSA. Check that any company you speak to is classed as an “Authorised Payment Institution” on the FSA website – this means they operate safeguarded client accounts, much like a solicitor, and must adhere to certain guidelines when dealing with client funds. In addition, the business must carry a suitable amount of capital, and given that currency brokers offer an “execution only” service and do not therefore speculate in the markets, they are not exposed to risk in the way that banks often are.
In summary for any individuals or businesses who have a requirement to send or receive payments in different currencies, it is vital to check that they are getting a good deal on their exchange rate. While the high street banks can of course handle these transactions, it is often quicker and cheaper to use a specialist, along with the extra comfort of having experts on hand to help with all aspects of your foreign exchange exposure on an ongoing basis.