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5 ways to save money on foreign exchange

5 ways to save money on foreign exchange

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In 2019, we’re more dependent on international money transfer than ever before. More of us work for companies that pay us from overseas. We buy goods from marketplaces halfway around the world. Our children travel and work abroad, and we buy more international real estate than we’ve ever had before.

All these situations have us moving money across borders more than we ever have previously. As a consequence, we’re starting to wake up to how expensive it can be via “traditional” channels. Let’s take the banks as an example – before a single cent has left your branch, you get whacked with a $30 wire fee.

It gets worse when they apply their exchange rate. Priced at 2%-5% off interbank, it allows the banks and legacy transfer providers like PayPal to charge an invisible tax. At least, it used to be invisible.

In the 2010s, online money transfer providers like Transferwise and WorldRemit have flourished by undercutting the bank’s gluttonous rates. Lacking their overhead, they were able to do away with fees and charge exchange rates less than 1% off interbank.

If you want to save money on foreign exchange, there are many ways you can do so. For instance, the web-savvy consumers of today research every buying decision they make online. After they compare money transfer companies with traditional financial institutions, they’ve opted for them in droves.

That’s just one way. In this blog, we’ll reveal five methods you can use to save your hard-earned money when moving it internationally.

Use money transfer companies to move cash instead of the banks

As we touched on in the intro, banks make money hand-over-fist on currency exchange. Until this decade, they’ve benefited from the ignorance of their customers. These days, they continue to make a killing, thanks to their tremendous brand power, especially among older customers.

However, even these consumers are starting to pull the wool from their eyes. Let us illustrate how badly the average bank rips off their customers. At publication time, Toronto Dominion Bank in Canada charges their customers $30 minimum for a bank wire.

Let’s say you’re moving to take a job in the UK. In the process, you need to transfer 10,000 CAD from your current savings account to your newly opened one in the United Kingdom. To get the equivalent in GBP, you’d have to pay Canadian at the rate of 1.6870 (TD’s site doesn’t show the exact CAD/GBP rate.) On the other end, this would leave you with 5,927 GBP.

What if you used Transferwise instead? Using their CAD/GBP rate of 0.6129, you’d get 6,081 GBP. Compared with the banks, that’s a difference of more than 150 GBP or 250 CAD!

Given the difference between these two options, you could take the difference and throw yourself a cracking home warming party!

Need money for travel? Opt for a travel money company.

Every winter, people flee the snow and cold for warmer climes. Before stepping on the plane, many opt to order currency to avoid having to deal with dodgy ATMs. Like their commercial exchange rates, the bank’s monopoly allowed them to charge any price they wanted over the years.

However, private companies are even targeting this niche. Today, companies like Travel FX Holiday Money offer rates that are leagues better than the banks. Let’s compare them to a common high-street bank, like Barclay’s.

Let’s say you want to buy 1000 EUR for your holiday in the Canary Islands. In return for this service, Barclay’s charges an exchange rate of 1.0576. To process this transaction, you’ll need to pay 945.54 GBP out of your account.

What if you went with Travel FX Holiday Money instead? They charge a much better GBP/EUR rate – 1.1050. As a result, you’d only have to part with 904.98 GBP. That 40 GBP extra would be enough to pay for your first meal, plus some sundowner drinks – not too shabby!

Accept payments for freelance work via services like Payoneer

More of us work from home then ever before. By 2020, more than 40% of Americans are expected to be freelancers, according to a survey commissioned by Intuit.

While setting your own hours and picking your own clients are definite upsides, downsides exist as well. One of them is coordinating payments. From delayed transfers to exorbitant fees, PayPal has gotten more than its share of grief from remote workers. The last complaint isn’t without merit – they charge a rate that varies 4-5% (or more) from the interbank rate.

Add fees on top, and it’s easy to see why freelancers have fallen out of love with PayPal. Thankfully, 2019 has brought with it several viable alternatives. Payoneer is among the best of the lot, as it charges low/no fees, depending on the situation. Also, its exchange rates are highly competitive, as they charge no more than 2% above the interbank rate.

Add in receiving accounts, invoice management, and a Payoneer card usable at retailers and ATMs, and Payoneer blows PayPal out of the water.

 Involved in e-commerce? Get receiving accounts through WorldFirst.

Ever wonder why the shopping centre you wasted time at as a teenager is now dying? Thanks to Amazon, eBay, and other e-retailers, the mall has now moved online.

This shift has created a massive opportunity for entrepreneurs worldwide, who have opened their own shop on the web. However, this situation isn’t without its issues. Sites like Amazon have many international marketplaces, like .ca in Canada, and in the United Kingdom.

Not one to turn down a moneymaking opportunity, Jeff Bezos hasn’t given his retailers a break on currency exchange. To repatriate their profits, e-commerce entrepreneurs end up paying FX rates 3.5% above interbank.

Thankfully, money transfer companies like WorldFirst have come up with a workaround. This firm offers receiving accounts that function as a domestic account. Because of this, you avoid the terrible FX rates charged by Amazon, eBay, and others.

Whenever you need to repatriate your revenues, you’ll do it at their excellent exchange rates. Usually, the ones WorldFirst charges are generally less than 0.5% above interbank. All told, this difference can save you THOUSANDS per year.

Trading equities abroad? Pick a broker that gives you good rates.

Even equities trading has gone international. Firms like Fidelity Investments and Interactive Brokers allow you to trade stocks abroad. As such, it is now possible for traders to make a living at any time, day or night.

However, if you want to buy Tencent, Sony, or Tesco, you’ll have to change currency to RMB, JPY, or GBP. Like the platforms we’ve discussed above, each charges their own FX rates. Evidence suggests Interactive Brokers offers better per trade commissions and FX rates. However, we advise shopping around before setting up an account with any broker.

Why use the banks to move money ever again?

From changing money for a holiday to trading stocks, there’s no reason to rely on the banks anymore. They don’t show any sign of wanting to compete on price. As such, there should be nothing holding you back from exercising the multiple options available to you.

Choose wisely, and you could save THOUSANDS annually!

This is a collaborative post.

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