The Insider's Guide to Exchange Rates and Transferring Funds


Written by Matthew Gilmour*

OZFOREXGetting the best deal on your foreign exchange transfer is simple and can mean you are thousands of dollars better off when you emigrate. Having worked in the industry for 15 years, I hope to pass on some key points to readers who have a transfer looming.

Which provider?
The first and most important consideration is the safety of your funds. Therefore, you should use a regulated foreign exchange provider or a bank. Foreign exchange regulations vary from country to country. Some jurisdictions do not regulate non-bank foreign exchange providers, whereas other countries such as Australia formally regulate providers to ensure they meet certain financial, audit and training standards.

Australian regulations are some of the strictest in the world. They require licensed foreign exchange dealers to meet strict capital requirements and employ a range of internal procedures to ensure consumer protection. OzForex has an Australian Financial Services Licence to deal and give advice in Foreign Exchange granted by the Australian Securities and Investments Commission (Licence No. 226484). The best thing to do when choosing a foreign exchange provider is to compare services and consider such things as:
  • Differences in exchange rates, transfer fees and receiving bank fees
  • Transparency of prices - is the provider open about their margins?
  • Ease of use
  • Access to experts who can help you over the phone
  • Can you choose the time of conversion yourself?
  • Access to hedging tools such as Forward Contracts
  • Is the foreign exchange company you are dealing with licensed and regulated?
Comparing exchange rates The second consideration is the exchange rate. In most cases, non-bank providers offer significantly better exchange rates than the banks. There are some traps when comparing exchange rates that are outlined in the next section. The key point is to compare rates at the same time and ensure you are getting a genuine quote.

The Interbank rate is the wholesale rate. No customer will receive this rate but your aim is to get as close to that rate as possible when you book your exchange rate. The exchange rate that is applicable to you is the customer rate. If possible, negotiate a fixed margin or number of 'points' away from the Interbank rate. The difference between these two rates, the margin, is how forex providers make their money.

Many providers display interbank rates on their websites without making it clear that these are not their customer rates. You should not use posted website rates for comparison purposes unless the providers are willing to be bound by them. Constantly changing exchange rates make it difficult for consumers to compare exchange rates offered by competing providers. If comparisons are not made within minutes of each other, one provider may look better than the other when it's the fluctuation in the exchange rate that has made the difference. Also, some providers will quote an aggressive rate initially only to quote a far less competitive rate when the time comes to lock in the transfer.

Ask the provider to quote their percentage margin versus the Interbank rate and then compare each provider's margin. Once the margin is agreed then you can monitor the Interbank exchange rates from numerous sites. This strategy puts you in control.

Example: You have agreed on a margin of 0.5% from the Interbank rate. When you are ready to book a rate it's time to check the Interbank rate. If the Interbank rate is GBP/AUD 2.4000 then the rate you should receive from your provider should be 2.4000 * 0.9950 = 2.3880 (if the rate is worse you should ask for an explanation - have a few sites showing spot rates ready so you can hold your ground if necessary).

Predicting future exchange rates
The first rule of foreign exchange is that nobody can accurately predict future exchange rates and consumers should be very wary of dealers who claim they can. If dealers could predict exchange rates, it begs the question: Why aren't they lying on their yacht somewhere enjoying their trading profits? You will be better served making sure you are getting competitive rates and understanding the options you have to minimise the impact of adverse exchange rate movements on your funds transfer.

Fees
Consumers can be charged two fees when they transfer funds. The first, a transfer fee, can be charged by the forex provider or bank at the beginning of the transfer. The second is a receiving bank fee which can be deducted when the funds arrive at the destination account. Savings on the exchange rate usually far outweigh the cost of fees so it's important to look at both the fees and the exchange rate combination when transferring funds.

Let us save you money
OzForex has helped thousands of new migrants transfer their life savings to new countries. We hope to assist you by eliminating the stress and anxiety that can accompany this most important of financial transactions and save you money at the same time! OzForex offers you unbeatable exchange rates, maximising the amount of Dollars you receive for your British Pounds. We offer corporate rates to individuals, which results in great savings on your international transfers and more money for you in Australia. This can make a big difference when you are setting up your new life in a foreign country. OzForex charge no transfer fee on payments over GBP 3,000 and we guarantee that no receiving bank fees are charged in Australia. This adds to the savings you will enjoy.

To manage foreign exchange risk from market fluctuations, OzForex gives you access to Forward Contracts, Limit and Stop Loss orders.

To speak to one of the accredited OzForex dealers about your foreign exchange requirements call 1300 300 424 in Australia (0845 686 1950 in the UK; 1800 680 0750 in Canada or 0800 161 868 or click HERE to register;

Registering with OzForex is FREE and you can view our live dealing rates immediately.

As a member of the Australians Abroad Group you will receive your first two transactions fee FREE!

This article is brought to you by OzForex Foreign Exchange Services. OzForex is one of the world's leading foreign exchange companies, providing live exchange rates and focused on providing a smarter, online alternative to existing international money transfer services. Established in 1998 with the aim of giving individuals and corporate clients a better deal, OzForex has offices in Sydney, Toronto, London, Hong Kong, San Francisco and Auckland.

OzForex is listed on the Australian's Securities Exchange under the code OFX. The OzForex Group includes OzForex, UKForex, Canadian Forex, USForex, NZForex, Tranzfers and ClearFX.

OZFOREX Limited, ABN 65 092 375 703, AFS Licence Number 226 484 'This information has been prepared without taking into account the investment objectives, financial situation and particular needs of any particular person or company. OzForex makes no recommendations as to the merits of any financial product referred to in this advertisement. Please read our Product Disclosure Statement at www.ozforex.com.au/documents/pds.htm and our Financial Services Guide at www.ozforex.com.au/documents/fsg.htm.'
*Mr Matt Gilmour is the founder of OzForex.