Blogging from the Murcia region of Spain until early June, when I return to
the Highlands of Scotland for a few months

'Fair and softly goes far' - Miguel de Cervantes

Wednesday, 14 March 2012

By-pass the banks and get currency at much better rates

For most people, sending money abroad for various purposes (replenishing an overseas account, making payments when buying a property, etc) or simply buying some foreign currency banknotes as a part of funding a holiday abroad, has traditionally involved popping along to the bank and arranging the transaction. It will work pretty efficiently most of the time - the bank will make a charge for doing a transfer and, unless you are dealing in pretty large amounts, they will most probably 'sting' you with a pretty poor exchange rate.

When I was making the stage payments for the purchase of my holiday home abroad several years ago the individual payments I had to make were pretty substantial, so like most people I did the transactions though a foreign exchange trading company. For the very finest exchange rates, 'inter-bank' transactions normally begin at GBP5million and up, but if the individual amounts are rather lower (in the several tens of thousands of Pounds, typically the case when buying a property in a series of stage payments as the project progresses) one can still make very significant savings by going though a dealer, rather than simply going along to the bank branch, because even if they call up their own exchange centre to arrange the deal the margin they will take on the deal will be a lot greater than from a foreign exchange dealer. In addition, the foreign exchange dealer will not charge for the actual transfer, unless the deal falls below its own thresh-hold amount. Obviously one still needs to get the funds into the hands of the dealer so they can do the trade; in the days before internet banking (not so very long ago) that would probably mean sending the dealer a sterling cheque, which would take a few days to get there and be cleared by them, or (for a fee) arrange a domestic transfer through the local bank to the bank account of the dealer.

More recently I have been transferring funds once or twice a year to a currency dealer using my internet banking facility with my British bank in order to replenish my account abroad with the funds needed for my extended stays there; doing it only a couple of times a year means both better exchange rates because the amounts are a bit bigger and secondly no transfer charges because the amounts exceed the foreign exchange dealer's minimum amounts for free transfers - their profits come from the spreads they still make on the exchange rate, albeit a lot smaller than the local bank would levy.

However, I like to travel with some of the local currency of wherever I'm travelling to (unless the exchange control rules of the destination country preclude this) so that at least I can pay for a taxi on arrival or perhaps buy meals on the first day or so, before I can get to the bank there to change some money, in the old days in the form of travellers' cheques, in more recent years by sticking a piece of plastic in a cash-machine - and avoid the 'gouging' rates that exchange bureaux at airports typically indulge in. For this initial spending-money cash I have usually just gone to my bank, ordered the money a few days ahead and gone back to pick it up when delivered, paying the currency-note rate charged by the bank and thinking I had few realistic alternatives (apart from, say, going to the Thomas Cook branch in nearby Inverness) where perhaps the rate might be very slightly better.

However, having just a week or so ago done a relatively larger transfer to replenish my Spanish account using a foreign currency dealer (for reference this was World First), with me transferring the payment to them on-line via the internet and it reaching the destination two or three days more quickly than doing it direct from my own bank, as well as achieving a much better exchange rate (with a saving of about 3.5%) I began to wonder if I could get a better rate on-line for currency notes too, for that initial local spending money in Euros - a Google search threw up the website and the stark divergences in rates offered. The firm at the top of the list Travel FX seems to get a great number of uniformly-positive reviews so I thought I would give them a try. In a nutshell I booked a transaction with them last Saturday morning, transferred payment to them on-line during the weekend and received the Euro bank-notes today (via Royal Mail 'special delivery'), saving myself 3.99% compared with what I would have been charged by my bank locally, in fact the notes rate was not so much different from what a foreign currency dealer would have been offering for a funds transfer, whereas the margin on notes from local banks is usually much greater than for transfers, resulting in a much less favourable deal for bank-notes even than for transfers. As this was the first time I had ordered foreign currency notes over the internet I was slightly anxious that my notes would turn up as promised, but I have to report that I was kept fully informed by email at each stage of the process and the notes turned up here on time today, as agreed when I placed the order last Saturday. I shall most certainly consider using this method and this firm in future. It really is a "no-brainer" so far as I am concerned - technology and the internet have made such processes possible and it would be foolish not to use them.

(NB/ This article is cross-posted from my other blog because I think it is of general interest.)

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