Finding the best deal for transferring currency

Whatever you are told, currency transfers are never free.

Expats looking to transfer money internationally between accounts held in two different currencies normally spend some time searching for the best exchange rate, but ignore or are not aware of the fact that commissions and hidden extras may be creaming too much off the top. Many banks’ literature promises ‘free transfers’ , but in the real world there’s no such thing, as the providers want to make money on every single currency transaction, however small.

Banks as well as currency exchange brokers quote exchange rates which are set at a small margin from the current interbank rate – known in the trade as the ‘mid-market rate’, normally used when financial institutions deal in millions. The hopefully small difference between your quoted rate and the interbank rate is the ‘spread’, with the larger the spread the greater the bank’s profit from your deal and the less you’ll receive. Most foreign exchange companies operate using a smaller spread than do banks, meaning you’ll get a better deal.

It’s also best to avoid providers who promise zero commissions, as the phrase is simply a marketing tool used to hide the fact that the provider is charging you using a large spread. That’s how such providers make their profits! Another trick to be aware of is that some foreign exchange providers, in particular the banks, charge a transfer fee in addition to using a larger spread, hitting the customer both ways.

Online currency exchange providers are a good option for many, particularly as regards convenience. Once you’ve registered, it’s very easy to transfer between currencies via your debit card, and the transfers themselves take little time. Regulations are the same as offline providers’ and include registration with the UK authorities as well as guaranteeing same day delivery in some cases. Even so, there’s no real way to ensure you’re not being ripped off, even for just a small sum.

Interestingly, in 2015 a campaign began in the hopes the then British government would act on consumers’ behalf by stopping the practice of exchange-rate mark-ups. The Cameron government promised to stop brokers and banks from using misleading pricing on foreign exchange but, typically, the promise was never fulfilled and it’s doubtful whether the present government will take any action.