Friday, November 16, 2012

Foreign Exchange Considerations Before You Move Abroad

Today's guest post comes courtesy Peter Lavelle at foreign exchange broker Pure FX.

Look after the pennies and the pounds will look after themselves
Moving abroad is fun, but there are practical matters, too.
Photo by Tristan Martin
Are you thinking of moving abroad, perhaps to buy a second home? Then among the many considerations to take into account (including the language difference, finding a job and so on) is the business of transferring money abroad.

After all, if you intend to buy a foreign home, you’ll likely be making regular transfers from a domestic bank account to a foreign one. If, on the other hand, you simply intend to move without buying a place, you may want to transfer enough money to see you alright for the first few weeks, until you’re settled in.

Given all that, what should you be thinking about from a foreign exchange perspective?

What service should you use?

Generally speaking, there are three factors to consider when deciding what service to use to transfer your money abroad. These are: the quality of the service, its security credentials, and the exchange rates on offer.

  1. Service. When you transfer money abroad, you’ll likely be assigned an individual dealer to help you through the process. Given this, it’s important to ask: are you happy with the person you’re talking to? Does it seem like they know what they’re talking about? If not, you may wish to go elsewhere.
  2. Security credentials. Is the service licensed and registered to transfer money abroad? In most countries, there’s a government authority responsible for regulating money transfer services. If your service doesn’t belong to and adhere to its legal requirements, you could be putting your money at risk.
  3. Exchange rates. What exchange rate does your service provide? To make sure it’s the best it can be, it’s worth comparing the rates available from different providers. High street banks, for instance, are notorious for providing rates up to 4.0% worse than those from dedicated dealers.
How do you maximise your exchange rate?

Where your exchange rate is concerned, there are two things you should keep in mind. The first, as I’ve already mentioned, is the rate available from your provider. However, you also need to look at what’s happening on the foreign exchange market itself.
  1. Consult Google for the exchange rate. To use Google to find the current exchange rate, just enter the currency codes of the currencies you want to exchange. If that’s US dollars to UK pounds for instance, enter USDGBP. Google will then deliver the latest rate.
  2. Look as far in advance as you can. Once you’ve decided to move abroad, look at transferring your money at the earliest  opportunity. This is because, the more time you give yourself, the more time you have to examine the rates, instead of being stuck with whatever’s available at the last moment.
  3. Set reasonable expectations. If you’ve not looked at the exchange rates in a long time, chances are they’ve changed a lot. However, instead of waiting for them to change back, look at where they’ve been the last three months, and set your expectations based on that. You’re less likely to be disappointed.
With these tips in mind, you should be able to locate both the best foreign exchange service, and the best available rate. Good luck!


  1. When I moved abroad the first time I used to calculate the exchange rates, I wasn't aware that google has such a service. probably one of the older services but its still easy to use. Another factor to be taken into consideration is that the actual rates you will get when you convert will be worse than what you see on these services owing to commissions and profits for foreign exchange dealers. In most cases there is no way to get around it, but there are times when exchange dealers in your home country might give better rates to convert to a foreign currency. However its more likely that you will get better rates in the country of the currency that you are converting to.
    My 2p

  2. On #1 only if you have a large amount of cash for exchange, otherwise it's just a regular wire transfer and it goes into 'the pool'. Also keep in mind the exchange rates are simply a running average and can fluctuate a whole lot during the course of one day. I got lucky in the summer of 2011 when I knew we were moving back and I saw the rate for the swiss franc spike. I managed to make about 30 cents on the dollar before it crested and they pegged it to the euro.

    Also, for Americans anyway, they need to familiarise themselves with the vocabulary of international banking, e.g. SWIFT, IBAN, etc. What's more, is they'll need to check whether or not they can transfer money remotely and, if so, in what amounts. It's getting very cumbersome to do so from the US without being physically present or without a proxy.

    And as far as predicting what the Euro is going to do, particularly with the eurocrisis right now, I'd hold back the bulk of the money until things are more stable in the EU as who knows what's going to happen and it's always good to prepare for the worst, i.e. if you transfer over all your cash and the euro tanks or is greatly devalued, there goes all your money.

  3. Here is a useful site to check exchange rates, especially if you don't know what the currencies are called.

    For day-to-day expenses, I use my Visa debit-card, the same one I use at ATMs at home. The daily limit is $1000, more or less, and the exchange rate is not bad. NOT a credit-card, because the interest rate is punitive for cash withdrawals.

    Also, for larger amounts I always use reputable banks, not some small bureau-de-change.

  4. I researched ATM cards with low fees before I came abroad to Russia.

    I have four ATM cards: Charles Schwab (brokerage account and bank account) and Fidelity (brokerage account and bank account). Each has a $1000/day withdrawal limit, so I can get $4K a day.

    The fees are very reasonable: I pay about 0.25%-0.50% for all fees including currency conversion.

    I have cards from other banks but the rates aren't nearly as good. You have to search out low-cost cars. Most banks ding you for total fees from 1%-2%. The worst was Chase, which dinged me for about 5% (a flat $5 fee plus a 3% currency exchange fee).

    I tried doing wire transfers but I mostly found it to be a pain in the ass: lots of phone calls and documents, slow receipt of funds (like two days) and unexpected fees on both ends. Unless you're transferring a large sum of money I don't see the point.