Need to transfer money for a property purchase or other purpose? Dan Waterman answers some common currency questions
How can a currency specialist help you move your money efficently?
Why use a currency specialist to transfer your money overseas?
Well, in a few simple words – to save money. When buying a property in France, one of the most important (but often overlooked) considerations is how you will transfer your funds. Many buyers take what appears as the obvious option to make the transfer: the high-street bank. From our own research, one in three people still don’t realise that there is an alternative to their bank for currency exchange. But being at the mercy of poor exchange rates, slow payments and unnecessary charges is a thing of the past.
How can currency specialists provide better rates than a bank?
It’s all they do. The only service a currency company provides is currency exchange, whereas banks focus their efforts in other and more lucrative markets such as mortgages, loans, insurances etc. A bank will typically set their exchange rates in the morning with a wide margin to ensure they always make a profit, no matter the fluctuations during any given day. In contrast, a currency specialist will use live rates and therefore work on much smaller margins with the client. Whether the initial transfer is a large lump sum or ongoing transfers such as mortgage payments, living costs, pensions etc, the common result is the same: you are guaranteed to save money using a currency specialist over your bank.
Is it safe and are there any fees?
Yes, 100% safe and secure. The reason for this is that currency specialists are regulated by the Financial Conduct Authority (FCA), primarily to oversee that when you transfer your funds through a currency specialist, your money is held in a segregated client holding account.
Ultimately, this means that all your funds (regardless of the amount), will be protected until they reach your beneficiary bank account. This protection should not be confused with your bank’s FSCS compensation scheme, as that only protects up to £85,000 of your money.
At what point should I set up an account?
As soon as you have decided that you will be buying a property abroad. Once you open your free account, you have access to the expert knowledge of your personal account manager, as well as the numerous resources and tools that can help you plan your transfer at the best time, minimising your risk and maximising your funds.
It is worth noting that if you open an account and never use it, you won’t be charged as you are under no obligation to trade. Also, some companies run competitions and offer new customer sign-up bonuses from time to time, so keep an eye out for these fun incentives.
What are transparent exchange rates?
This term has a different meaning depending on which currency company you are speaking to. For some it will mean they will tell you the rate before you buy. Others, however, will display the rate on offer and the rate they buy at, allowing you to see what they profit as a company. The latter can build clients’ trust and puts your mind at ease knowing you have achieved a fair exchange rate.
How can I secure my rate with a forward contract?
A currency specialist offers products and tools to help protect your money from exchange rate fluctuations. One of the most popular is called a ‘forward contract’. This is a ‘buy now, pay later’ product, whereby with a small deposit you can lock in an exchange rate for a date in the future. This product is great if you do not want to use all your disposable income or if you just don’t have the full amount readily available yet. Ultimately, this will allow you to plan your budget, knowing exactly how much you will be spending and receiving in both currencies.
For example, let’s say that you know that you will be buying a property within a four-month period and that you have £250,000 as your budget. At its highest point in April 2017, the exchange rate was 1.1955, therefore a budget of €298,875.
You find a house and make an offer; it can take as little as four weeks, but up to four months to complete the purchase. Let’s say it takes four months, and the exchange rate is now 1.0955 (mid-august 2017) – meaning your £250,000 is now worth €273,875. A drop of €25,000, which could make your purchase unaffordable. This type of loss is one of the many reasons why customers choose to use a currency specialist.
What’s an E-wallet?
Some currency experts have an online platform that will give you an account with a built-in E-wallet feature. The E-wallet allows you to hold multiple currencies all at the same time, which is ideal if you have not opened a foreign bank account yet.
If the exchange rate isn’t favourable before you purchase your property, you can still deposit your funds in GBP and leave it there until the exchange rate improves.
On the other hand, if the rate is favourable, you can purchase your euros now and leave the balance in your euro E-wallet account until you are ready to complete your purchase. This type of account is not available at high-street banks.