Monday, 2 September 2013

Getting a good rate

Currencies trade around a fictional middle rate. This is always moving and you're never going to get it, unless you're on the trading floor, which these days would mean you are a computer. Banks have buying rates and selling rates, which typically add or take off 4 yen for each pound traded. Actually, as far as they are concerned, they are always taking the 4 yen, and as far as you are concerned, you are adding it. The bank always wins. They will also charge you for transferring from bank accounts in different countries.

Some banks allow you to hold accounts in different currencies, and let you change money between them. Businesses sometimes have accounts that will allow live trades, on the current market rate with a small commission rather than a published daily rate with a large commission. If you have one of these accounts, that may be the best way to trade. If you know someone who has one, you could ask them to help, but there is no guarantee that they will get the rate you want, when you want it.

If not, there are two other ways that will get a better rate than you would walking into a bank. One is a credit card with a bank in the currency you are trading from. Unless it's a debit card, withdrawing cash will likely be very expensive, but using the card for shopping will incur a charge of 2.75%, with a minimum of 2 pounds, so if you're buying something over 73 quid you're paying 2.75%, and anything over 50 quid is probably getting a better rate than you'd get from the banks.

Since my main worry is not so much getting a good rate myself as making sure the banks get as little of it as possible, the other way is my favourite.  I found someone who needs to transfer currency the other way. We came to an agreement to make transfers each month, based on the average rate over the last month. Unless the currency pair were violently swinging around the time of our exchange, both of us were better off as the rate was between the TTB and the TTS.