When it comes to currency exchange, we all have lots of questions – we want to know how to get the best rate and how to make our money work for us. So to help you here are the answers to some of the most common questions about currency exchange:
Will currency exchange rates really have that much impact on me? It seems to move by very little each week – a few cents mostly?
A small change in the exchange rate can make a big difference to your total, if you’re transferring a large sum.
For instance, let’s say you’re transferring £250,000 to France.
If the exchange rate is 1.20, you’ll get €300,000.
However, if the exchange rate falls to 1.15, you’ll get just €287,500.
For a £250,000 transfer, just a 5 cent movement can make a difference of €12,500, therefore.
How do I know if I’m getting a good exchange rate?
To find out if you’re getting a good exchange rate, call more than one company within a short space of time, and compare what rate they give you.
What’s the difference between interbank rates, rates you see in bureaus de change, smaller payment companies and foreign exchange specialists?
The interbank rate is the rate at which multinational banks exchange currencies, in vast sums. Because the numbers involved are so large, these exchange rates are only available to these banks.
The exchange rates you see in bureaus de change are usually those at which you buy or sell currency (they’ll often say “You buy at: X exchange rate”, “You sell at: Y exchange rate”).
The exchange rates you see smaller payment companies (such as Western Union) are also usually those at which you buy or sell currency.
The rates you see at foreign exchange specialists are usually the interbank rates.
What is a spot contract?
A spot contract is when you exchange currencies there and then, at the current exchange rate. It’s “on the spot”.
What is a forward contract?
A forward contract is when you fix the exchange rate at a certain time, so that even if the rate changes later, that’s the exchange rate you get.
So for instance, if the pound rises to 1.20 against the euro, and you set up a forward contract, you’ll get 1.20, even if the pound later falls to 1.19.
How much does a currency exchange broker charge?
It depends on the foreign exchange broker. Typically however, transfers over £50,000 are free.
Can I hold out for a better rate than is being offered?
You can. However, you should be aware that, while you’re waiting for the foreign exchange rate to improve, it may in fact get worse.
More Frequently asked questions about foreign exchange issues
How to transfer money to France
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