Don’t lose money

Transferring money abroad with your high street bank may cost you more than you anticipated. Kim Brown discusses why

The actual act of buying and transferring currency is not difficult to understand. In fact, it’s quite simple, yet so many ordinary buyers become bogged down by the jargon used by industry specialists. Several years ago, my in-laws lost a huge chunk of their life savings when investing in an overseas property – the event that prompted me to set up my own company – and a significant portion of their loss was directly attributable to a poor currency exchange strategy, something that even frequent investors often fail to consider.

Most problems arise when buyers don’t spend enough time thinking about, and understanding, the simple but fundamental elements that will enable them to avoid substantial losses: when currency is purchased at poor rates from a high-street bank and when consumers fail to buy at the right time. This means that a transfer of £ 100,000 could potentially lose you up to £ 5,000.

CURRENCY RATE IS CRUCIAL
Banks will sell you currency at a rate that is 1 to 4 percent higher than the rates quoted on the internet, Teletext or those listed in the newspaper.

In comparison, currency exchange specialists provide rates at around 0.5 to one percent higher and you can save two to three percent. For an investor wanting to transfer £25,000 the difference between a bank and a currency exchange company could be £500 to £ 750 depending on the currency and the rates.

No-one can purchase currency at these listed rates as they are the rates banks trade between themselves when they’re mov8ing millions. The published rates are provided to give the public an indication as to what the banks are trading currency at and, in which direction, the rates are moving.

BAD TIMING
Buying currency at the wrong time is the most common mistake. You would be surprised to know how many investors fail to understand that timing is a key factor. Even the most experienced will often wait until the last minute to contact their bank or, currency specialist in order to purchase their currency. This less-than-perfect strategy will force them to buy at that day’s rate which may or may not be a good one. There are two options available that will give an investor more flexibility and ultimately help them to achieve additional savings.

By far the better option is to work closely with a currency specialist, letting them know your requirements at an early state (e.g. two to three months before the transfer is required) so that they can watch the rates.

Discussing your need will enable you to determine a realistic target rate – one that you would be happy to achieve.

RATE OF CHANGE
Once you target rate is determined, the specialist will watch the rates on your behalf. The rates change every second and are affected by a variety of factors including, buy not limited to, economical and political announcements so it’s imperative to have someone keep an eye on them for you.

So, for example, lets say the Euro is at 2.50 today and the currency specialist feels that it’s possible to get a rate of 2.52 over the next two weeks. The targeted rate would be 1.52 and entered on our systems so that we could watch for that rate. Once the Euro hit 1.52 (the target rate) we would then call the client and ask if they’d like to by. By doing this, it allows the client to make an additional savings of 2 cents to every euro purchased. They key is to use time to the clients’ advantage.

High-street banks focus on numerous products. The sheer volume of their customers means that they often fail to explain to clients that, for a small deposit, currency can be reserved at today’s rate (if it’s in your interest to do so), an paid for in full at a later dates when the money is needed.

This later date could be moths later. If the rate is at its year high and a buyer doesn’t want to lose the opportunity to buy this rate, this option allows them to do it for small deposit. It is fantastic for those that want a preferential rate but don’t have the funds immediately available or, for those that want to keep their money in a savings account, earning interest.

Apart from offering better rates, discussing a realistic target rate and ultimately helping to achieve significant savings, a currency specialist can also eliminate the charges imposed by overseas banks. This can be up to £500.00 but many investors don’t realise this charge exists until after they send the money and it’s deducted from their account. Finally, most specialist currency companies can move money in 24 to 48 hours versus the three-fie days that the banks often take.