Nowadays, an increasing number of people have decided to pack off and leave British shores for a new life overseas. Whether it’s for work or for a new way of life and change of lifestyle for the family, it’s not the case that one needs to think about making a currency exchange only when the summer holidays come calling.
And you’d think that in this day of comparison websites and information readily available at the touch of a button, that it would be easy to get the best deal, and simple to find the best exchange rate, and get more for you money.
You’d think so, but that’s not the reality. In fact, with so many currency exchange companies out there, all after your custom, you can sometimes be landed with hidden fees that nullify the good rate, or given special ‘offers’ that are cancelled out by a poor exchange rate.
Currency exchange company worldfirst.com say you should be wary of anyone promising you a ‘free transfer’, because according to them, there’s really no such thing.
Despite how currency exchange can sometimes be sold to customers, all banks and currency brokers make their money the same way, and it’s certainly not by offering totally ‘free transfers’. That would be a surefire way of going out of business.
The team at World First explain how the business of currency transfers works, and how profits are made:
Currency exchange brokers will quote you an exchange rate at a small margin from the ‘interbank rate’ – also known as the ‘mid-market rate’ – that’s the rate at which banks deal in larger amounts – amounts over £10m, for example.
This margin is known as the ‘spread’, and the greater the ‘spread’ from the inter-bank rate, the more money the currency company or bank will make from your transfer, and the worse deal you’ll get. A specialist foreign exchange broker will usually take a smaller ‘spread’ than the banks, which means you money goes further.
So often you see the promise of ‘zero commission’, but this is just a marketing tool. All companies make most of their money by charging a greater margin, or spread, away from the inter bank rate. If you are charged commission, alarm bells should ring as you’re already being charged through the spread. The same thing applies to those foreign exchange providers who charge transfer fees for transactions.
It would be helpful if all foreign exchange companies were more transparent in their pricing, so you know where you stand. Some have already cut fees on personal transfers, so it’s clearer to see what you pay.
By being aware of the process, this will better enable you to understand whether or not you’re getting a good deal or your currency exchange.