There are many millions of British expats scattered across the globe, from Marbella to Sydney. Across the world, expats are making international payments between their home and host countries. Unfortunately, with exchange rates suffering, many are feeling the pinch. In real terms, the pound no longer goes as far in host countries expats are currently living in.
The pound situation
The pound fell around 7% against the dollar and the euro after the downgrade of Britain's credit rating from triple A due to uncertainty over the economic future of the nation. The situation may well improve but the signals are that it could get worse before it gets better.
Sending money from the UK
When it comes to sending large amounts of money overseas from the UK, it’s important to get both your timing right, and to transact with providers who will help maximise the value of your international payments.
Understanding foreign exchange costs
It’s important to understand the two distinct types of fees and associated costs that foreign exchange bureaus apply when quoting a currency deal.
The most obvious fee that exists within a currency transaction is what’s known as the ‘transaction fee’, ‘ transfer fee’ OR what might normally be advertised as a ‘commission fee’. With high street or traditional retail banks, these are often scaled based on the amount of money being sent, so that the more you spend, the proportionally cheaper the fees. With most non-bank foreign exchange specialists, above a certain transfer level, there will be no fees to transfer money.
‘Markup’ added to real exchange rate
Beware of making an expensive money transfer which is masqueraded as a fee-free currency deal. Often banks or brokers may advertise that they are ‘fee free’ or ‘commission free’ but will charge a hefty margin added to the real rate of exchange. It’s important to understand that the most important constituent of your financial transaction is typically how wide the margin being applied to the interbank exchange rate is. The closer it’s aligned to the real exchange rate, the better.
As a top tip, compare like for like the exchange rate offered between two reputable foreign exchange providers before trading. Also, try and haggle. You’d be surprised the lengths companies will go to win your business.
Transfers by bank
Many expats settle for high street bank transfers when it comes to moving their money. In reality, this is a very expensive way to transact. Banks tend to apply between 3% and 5% margins and so £100,000 sent from the UK to Spain could costs as much as £5,000. Sending £100,000 already equated to around €14,000 less by actual exchange rate than it was a year or so ago, and so it’s important to ensure that your provider applies the tightest margin possible, and that’s where non-bank foreign exchange specialists like MyCurrencyTransfer.com come to the party.
Specialist foreign exchange companies
There are a number of foreign exchange companies in the market that can provide you with transactions with low margins. These non-bank specialists typically apply margins of below 1%, which is between 2% and 4% better than average bank rates.
They are able to offer these excellent rates of exchange because they transact so much business. As foreign exchange specialists transact in billions, they are able to offer tighter spreads.
Compare currency exchange
As expats we have a hard enough time with the consequences of a struggling pound without having to suffer higher than required transfer fees and poor exchange rates. Housing and pension incomes from the UK suffer as the pound suffers. In turn, our lifestyle overseas tends to decrease.
Make good decisions about how you move your money and ensure that you get the timing right to get the best rate over the period that you require your money.
For more information and to compare money transfer companies, visit MyCurrencyTransfer.com.