Compare Currency Brokers – 2018
How to Choose Currency Brokers in the UK
If you need to convert more than £10,000 into another currency than you need a currency broker as they do offer exchange rates that are much better than banks. In addition to that they do specialise in foreign exchange making the whole process much easier. Most brokers in fact they do not charge any commission to pay the money into an international beneficiary account.
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Is it true that currency brokers charge 0% commissions?
Most currency brokers are advertising their services as 0% commission but how this is possible and what does really mean? To be honest it is the truth. The reason is that currency brokers make their margin on the difference between the price they buy their currency and the price than they sell it to you. In the past currency brokers have made their profit on both the buy/sell spread and also on the commission that they add on top. Now there is much greater competition and with currency comparison sites like TopTradingPlatforms.co.uk currency exchange brokers have been forced to reduce their fee and the extra commission was the first cost to go.
Having said that even if you are not being charged commission you need to understand that broker prices are general made a percentage away from the mid market price. So normally a small customer get charged at about 1% from the mid market by the currency broker. So to do an example if you convert £10,000 they will make a margin of £100. From that they will have to deduct their costs and that will be their profit.
What are Peer 2 Peer currency exchange and how they do compare against traditional conversions?
There are new Peer 2 Peer Foreign Exchange companies that say that they can swap your currency with a local in another country rather than using banks. Those companies like Transferwise claim not to use ‘evil banks’ as a marketing message to attract new customers. Their costs however are quite high anyway as they do charge a flat 0.5% on the conversion value and still make 1% on the buy/sell before costs. As the liquidity of this market is still not great they do use banks to do the conversion but they normally have discounted rates so that they can attract new business.
Why banks do charge tourists rates?
Tourist rates are normally between 3% and 5% from the mid market depending on what bank you decide to use. In addition to that you also need to pay transfer fees. If you exchange your currency in the airport than the rates can be even higher. Surely those rates look large but you need to consider the risk involved and the administration in converting a lot of small amounts. Most of those fees are in fact used to cover those costs in addition to the locations rent that currency exchanges have to pay for.
How do Currency Cards work?
One smart way to avoid paying high charges is to use one of the pre-paid currency card. Most currency brokers to offer those and it is like to have a foreign bank account. In this case you can convert small money and add them to the base currency at your wish. There are savings by going via this route compared to converting money at the airport but you need to consider that you would need to administer another card.
What to do if you have to convert over £100K into another currency?
If you have to convert more than £100k than is much better to talk directly to a foreign exchange specialist that can ensure you get much better rates than 0.5% and also provide you suggestions on when to buy and sell. If you catch the right moment this will make more of a difference than how good your exchange rates are. Surely nobody can predict exactly where the currency markets are going to move but the dealers at currency brokers surely have a better chance of giving good advice on how to ensure you are protected against adverse rate movements.