Whether you spend time overseas for work or leisure, any trip abroad will invariably involve foreign currency exchange to a certain extent.
Here we’ll look at the most traded world currencies, including Pound Sterling, US Dollar and Euro.
In an increasingly international age, hundreds of thousands of people travel abroad every day. If you plan to spend money during your time overseas, be it a week in Paris or a month in Sydney, you will be engaging in foreign currency exchange.
Traveler's cheques used to be the most popular way of spending money abroad. These are pre-printed cheques of a fixed amount which are guaranteed by the financial institution which issued them and can be used in place of currency.
However, in recent years the use of credit/debit cards and ATM’s has increased considerably, and many people use currency transfer services to exchange currency before they go abroad.
The foreign exchange involves selling the currency you have and purchasing the currency you want on the currency market - a particularly volatile trading platform. The two currencies involved in the exchange are known as a ‘currency pair’, with their relative value being their exchange rate.
The currency you have forms the base currency of the pairing while the currency you want is the quote currency of the pairing.
So, if you live in the UK but are going on a business trip to Spain, you will need to sell your Pounds to buy your Euros. The Pound to Euro exchange rate tells you how many Euros you get for one Pound.
Similarly, if you live in the US but are going to Japan on holiday, you will need to sell your US Dollars to get your Yen. The US Dollar to Yen exchange rate tells you how many Yen you get for one US Dollar. Perhaps you are an overseas worker and are looking to send money back home to the Philippines. In this case, you can maximize your dollar to peso exchange rate conversion by using websites like CompareRemit, where you will be able to compare between the best exchange rates from different companies.
The exchange rate you are able to secure for your transfer can make a big difference to how much you end up with. Although shifts in the foreign currency market are hard to predict, monitoring market movements and currency trends can help you pick the best time to make a trade. Some institutions, like leading currency brokers, will supply you with specialist guidance in this area. While the savings you can make by securing a good exchange rate are more noticeable on larger transactions, you could end up with more travel money by transferring your funds at a better rate.
Some institutions which offer foreign exchange services will also charge transfer fees and commission costs for exchanging your funds, while others will supply your travel money free of charge.
If you want to maximize the amount of travel money you receive, it pays to do a bit of research into the foreign currency transfer options available to you.
Commission on Foreign Currency Transfers and Travel Money
Over the last ten years, the number of ways in which you can secure travel money has increased considerably.
Although the popularity of traveler's cheques has really wanted, the number of foreign currency exchange specialists has increased and it has become easier (if not cheaper) to use debit and credit cards abroad.
When transferring large sums of money overseas or organizing travel money it really does pay to look into your options and arrange your foreign currency transfer a bit in advance.
If you don’t investigate the various ways in which you could secure your spending money for a trip abroad, you could end up paying out unnecessarily on both hidden and obvious fees and charges.
Some companies will charge you a commission for conducting the foreign currency exchange on your behalf. The amount of commission charged tends to be a fixed or variable percentage of the amount of money being exchanged.
Although the amount of commission levied on a small foreign currency exchange (like travel-money sized transfers) won’t be huge, it’s still money you don’t need to be spending.
Commission on foreign currency transfers is usually applied in the following forms:
- Handling Fee – This is the fee applied by the currency seller for its part in the exchange service.
- Flat Fee – Flat fees don’t change, which means they can either be good value or bad value depending on the size of your transfer.
- Minimum Charges – The minimum charges might not be high, but they can be quite costly if you’re only exchanging a small amount of foreign currency.
You should also be aware that while some foreign currency exchange services don’t charge send money fees or commission costs, they may make up for this by offering you a slightly poorer exchange rate. Your best bet is to look at a few travel money providers, do the math and see which one offers you the best deal.
Published by Dorothy Jones