How Do I Best Navigate Being Paid In One Currency But Living In Another?

Posted by on May 24, 2012 in live abroad, moving abroad, work abroad | No Comments

With the markets moving constantly, it is important as an expat to devise a currency strategy to buy or sell currencies when the rate is in your favour. Timing is key. Fluctuations of up to 10% can happen pretty rapidly, which in effect can add up to 10% to the cost of your international money transfer.

With sterling at a three and a half year high against the Euro , we we’re delighted to receive the help of international money transfer comparison site MyCurrencyTransfer, to discuss the options.

Currencies of the world © by Images_of_Money

Bank or Foreign Exchange Specialist

First and foremost, it is important to understand the different ways you can transfer money abroad. Typically, the two main options are either through a bank or specialist currency broker.

In the past if you lived overseas but received a regular income in the UK such as a pension, dividends or rent on a property, the natural way to transfer your pounds into euros or dollars would be ask your UK bank to arrange payment to your local bank overseas.  Until an alternative arrived, the system was sufficient but more recently as specialist currency firms have started offering regular payment plans to private clients the high fees, slow transfers and poor exchange rates offered by UK banks have become exposed.

The Exchange Rate Margin Is Key

Most expats are moving away from their banks when making international money transfers, and using the latter option of specialist currency brokers. Currency companies typically offer better-than-bank exchange rates and save between 3-5% of the value of your transfer. At a base level, banks and brokers make money the same way. They apply a margin to the interbank rate. However, the margin applied by the banks vs a specialist currency company is often substantially more.

As an expat, one of the additional key benefits in using their service is their ability to watch the markets on your behalf and help you transact at the right times.

Transaction Fees

International money transfers via the bank are a nominal £20-£40 per transaction. Over the course of a year, these fees can substantially add up. Consider 12 monthly payments at £30 per transfer and you could be looking at £360 in fees alone. These fees can substantially be reduced by using a foreign exchange broker.

According to James Walton of International Foreign Exchange, ‘‘ the individual savings aren’t life changing but over the course of a year, 100 or 200 euros extra each month quickly becomes a significant advantage. Anyone living in the Eurozone should be aware of the cheaper alternatives because against the euro, the pound is significantly lower than 5 ago, yet the cost of living is only rising.’’

Regular Overseas Payment Plan

Almost all foreign exchange brokers offer a ‘regular overseas payment plan’ which is ideal for frequent monthly transfers. Typically, they collect your sterling via Debit Card each month and automatically send the foreign currency abroad to your Euro bank account. You benefit from vastly cheaper transaction fees over making individual payments month by month via the banks. Transfer schedules can be fixed, ranging from weekly to annual and you can also discuss the option of fixing your exchange rate for a period of time (ask about a forward contract).

5 Questions To Ask A Foreign Exchange Specialist:

Are you FSA authorised and regulated?
Do you operate segregated client accounts?
How long have you been in business?
Quote me a tradeable rate please? (take with a pinch of salt any indicative rate quotes)

About Dan

Dan is the Managing Director of MyCurrencyTransfer. About For an in depth comparison of the best value money transfer deals, log on to independent comparison site www.mycurrencytransfer.com. For those looking for holiday money deals, it’s sister site www.mytravelmoney.co.uk aggregates live travel money rates from all the major suppliers.

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