Currency Exchange

So you need to move some cash. The following information is essential to know if you want to save money.

"I want to change my money at the rate I see on television or in the newspaper, how do I get that higher rate?"

The answer is that you only can if you are moving over a million pounds/dollars/euros at a time.

The price you usually see quoted in the media is the 'mid-price'. If you look at the rates in a bank or currency exchange shop you will see a price they buy at (the 'bid') and a price they sell at (the 'offer'). The difference between the two is the 'spread'. Whatever amount of money you are changing, there will always be a difference between the mid-price and the price you get - this is someone's profit for supplying you the service of exchanging the money.

So what are the options to move my money?

The easy solutions (using your credit card, bank or currency exchange in the airport) will almost certainly not get you the best rate of exchange for your money. However, for short trips abroad or small amounts of money, they are the most convenient and accessible.

For larger amounts of money, the best solution for moving money is to use a specialist foreign exchange broker . A specialist will be able to get you an exchange rate nearer to the mid-price and also be able to offer services that may fit your individual requirements better than a straight currency exchange. See some other options below:

ATM Machines:

This is the best way to get dollars from a foreign bank account to euros, as long as your bank doesn't charge a 'conversion fee' for international use, and the ATM doesn't charge a transaction fee. (ATMs from cajas tend to be less likely to charge a transaction fee than bank ATMs). With ATM machines, there is currently no spread between buy and sell rate.

Plan Ahead:

A little bit of advance planning can save money and avoid big problems later. Exchange rates can be very volatile and large, rapid shifts in the value of one currency against another are not uncommon.

Bank transfer:

This is the best way if you need more money than an ATM machine can manage.

Personal checks:

Spanish banks charge a minimum commission of 0.5% to transfer money via a foreign check, and it could take a few weeks. (Before you deposit the check, make a copy of it and the deposit form.)

Traveler's checks:

With a big spread between the buy and sell rate, this isn't as good as ATM's.

Credit cards:

With travel insurance, purchasing insurance, no transaction fees and reasonable exchange rates, credit cards can be very effective for most purchases. You will have to show the cashier your passport or Spanish photo ID (if you have one) in order to use them. Note: Since 1999, some banks began charging fees of 1% - 3% for use of a credit card on overseas transactions. Read your monthly statements!

Specialist foreign exchange brokers

Such as FCD and HiFX do not charge commission and transfer fees. Think about this scenario: you have just found a great deal for a dream retirement home being built in the sun. You need to pay 10% now and 90% on completion, which will be in 9-12 months. Maybe you would prefer to keep your money invested until your new home is completed, are waiting to cash in a pension or first need to sell your existing home to get all the cash free. The problem comes it that you know how much this will cost you in your home currency if you make the purchase today, but have no idea what this will be tomorrow, never mind in 9 months time.

To reduce your risk you could make a contract to buy the foreign currency at a fixed price on a fixed date – this is called a ‘forward’. You will normally need to put down 10% of the contract value as ‘margin’. This means you can guarantee in your own currency how much the house will cost, while not having to supply all of the money immediately. There are various other financial tools that can be used to for different circumstances. The best thing to do is discuss your situation with a specialist foreign exchange broker. A professional in this area will be able to understand your situation and suggest solutions - a good one will also be able to explain them clearly! Information on exchanging currency from sterling and dollars to euros for expatriates living in Spain.

Moneycorp

has transfer fees ranging from £4 for regular payments to £15 for lump sums. It also covers any charges the receiving bank makes.

The exchange rate is equally as important as the charges.
As always it pays to do research.

Commercial Exchange Rate

Overseas house hunters and pensioners often overlook the cost of sending money abroad. For each transaction, High Street banks can charge commission of 2% and transfer fees ranging from £20 to £40.
The foreign bank may also deduct 0.5% when it receives the funds. And if you need to make regular payments to cover a mortgage or to receive your pension, the bank may give you the tourist rate, which is 2% to 3% worse than the commercial rate.
So a monthly transfer of £800 could cost you up to £72 each time including fees, according to broker Foreign Currency Direct (FCD).

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