Foreign Exchange

Forex Transaction and Transfer Costs

There are a number of costs and charges - both direct and indirect - that will substantially affect how much money you successfully transfer overseas:

• Transfer fee :  this varies from provider to provider (usually banks) and can be as much as £35 in the UK and $30 in Australia.  This can be significant in percentage terms if relatively small amounts of money are involved and real deterrent to regular transfers.

• Exchange rate  : this is where you can lose substantial amounts of money.  Expatriates will often calculate the Australian or other foreign currency value of a transfer by dividing or multiplying the sum by the headline foreign currency (forex) rates appearing on television or newspapers.  In fact, the rate quoted is usually the interbank rate – the rate at which international banks will exchange deposits.  This can be likened to the “wholesale rate” and banks and other foreign exchange providers build as much as 2.5% margin into their exchange rates when it comes to buying and selling currencies for individual clients (and sometimes more in less developed countries). 
  
  This can subtract thousands of dollars from a large personal transfer, and you are advised to shop around for the best rates available.  That will not always be a positive experience – many banks are unresponsive when it comes to a request for more competitive forex rates.  This may be because the size of any personal transfer pales in comparison with the large sums traded in the forex market on any day, but also because the business generates very comfortable margins.

If you are shopping around for a rate in the future you will need to talk in terms of the “margin over the interbank rate” that you will be charged. Most bank staff will “not have a clue” what you are talking about and you will first need to establish the correct point of contact in the bank – which is usually the Treasury department.

• Receiving bank fee – this usually comes as an unwelcome surprise and amounts to about £10 in the UK and about $15 in Australia.  Levels vary considerably in other countries.
  

Complete the Foreign Exchange inquiry form