When you’re making an international money transfer of a small or large sum to an overseas bank account, exchange rates are the most important part of the equation. They determine how much of one currency you can trade for another, and when you’re exchanging large amounts, even a few cents’ difference to the rate can have a big impact on how much you get.
Currency exchange rates reported nightly on the television news are all well and good – until you try to get that same rate from your chosen exchange facilitator. You will quickly discover that it is nigh impossible.
Why? Because the rates reported in the news are always wholesale or inter-bank rates. These are only available to the banks, government and large corporations.
The retail buy and sell rate is the exchange rate that is offered to normal customers. These rates are based on the wholesale rates but each currency broker makes their profit on the “spread” or “difference” in the rate. It’s the age-old underlying principal of trading – buy low, sell high and make a profit on the difference.
When making an international money transfer, it’s important to understand that the exchange rate is the “hidden fee” and this is often where currency suppliers make most of their money. This margin can vary considerably between banks and foreign exchange brokers. It may be that some will give you less for your foreign currency and will charge you more to buy it.
The bottom line is to leave plenty of time before your holiday to start shopping around for the best currency rate deal. Make a shortlist of providers and check their rates over a number of days before choosing a supplier. It’s a small amount of homework that could net you some handy additional spending money.
Find out more about exchange rates and why you should compare exchange rates here. Or get started comparing international money transfers on our website: