Let’s get started with the good news! This rant is going to be shorter (hopefully) than normal for a couple of reasons. Firstly, because it is a guest post so I want to make a good impression, and secondly, because I want to grab your attention so that you don’t make any more crazy mistakes when you carry out your currency exchanges. Oh, and there’s another reason – the senior bank executives and CEOs earn enough from you already so why give them more of your hard earned cash?

In the international teacher community almost everyone needs to move money around the world, and more often than not for one of the following reasons:

  • To send money back to your home country to fund a mortgage or unsecured retail debt that needs paying off.
  • To get set up in a new country with some initial capital and cashflow.
  • To send money to your investment portfolio, retirement plan, or for any insurance that you carry.
  • You may need to send money for your down payment on a property purchase.
  • There may be a need to help family or friends out and possibly pay overseas medical bills.
  • The list could go on if I had more time…

It’s not an exhaustive list, but the real point is that your friendly, warm, inviting bank are ripping you off every single time you have them exchange foreign currency for you, regardless of which bank you use where you are resident.

money transfer

But don’t worry, it’s not just you they are favoring with this treatment, it’s 99% of us that get this treatment (woohoo – join the club!), and all because our banks love us and want to nurture and develop their relationships with us.

Ok, let’s get to the point now so I can teach you how to avoid making these very silly mistakes and therefore help you keep more of your hard earned money for yourself.

When you go to a bank your overall experience will can differ dramatically. They may charge you a commission, or they may not. You may also be charged a fixed fee although that is less common now, but just be mindful of fees, hidden or not, and be sure to ask because most people don’t. These fees can be disguised to throw you off the scent and play with your better judgement, but that’s not all…

Even if you pay a commission or a fixed fee the money-suckers, sorry I mean banks, then take more of your hard earned cash by grabbing a large percentage of the amount you exchange. Sometimes (actually very often!) they don’t even tell you this because all they do is quote you the rate they are peddling on that particular day. You then accept it as it’s just easier to get it done there and then having gone out of your way to get to the bank, queue up to talk to a clerk/teller, and then have to rush back to work. Of course, they know all this and use that to their advantage, after all, they have a very large captive audience who they have manipulated to think that they are the best thing since sliced bread.

Let’s look at an example which on the surface looks quite straightforward.

money transfersYou want to send $10,000 which you have accumulated over the year from your salary and bonus back to the UK. You decided with your financial planner to put half into your retirement plan and use the other half to pay down your mortgage debt, since you have no unsecured retail debt and our recommended minimum of 3 months net income in cash for emergencies. I’ll also assume that your bank is rather nice to you today and is not charging any commission or fees.

Let’s say you are quoted a rate of 1.56 to buy your US dollars so you wired the funds to them in the UK and will shortly receive £6,410.25. That all looks fine and dandy. Don’t forget as well that you have also paid your local bank in the region of $30-60 for the wire transfer to your UK bank which is unavoidable. In addition your receiving bank may also charge you a ‘wire payment in’ fee so always check this too just so you know the exact costs for sending and receiving.

Well, there is another way…

Instead of asking your trusty old bank to change your money, you can instead use a Foreign Currency Exchange service. You have probably heard of these already and seen adverts online, in social media or on a blog that you enjoy reading such this one. These companies don’t have all the huge overheads that high street banks have, since they don’t have a chain of high street branches to staff and maintain.

These businesses are regulated and authorised to provide these services just like the banks. There are also a few other fundamental differences. Firstly, they know what term ‘customer service’ means and companies like Worldwide Currencies in particular, know how to provide an excellent high level personal service which is unrivalled, regardless of if you are exchanging $500 per month to send home to pay your debts or a lump sum of $1,000,000.

Additionally, you get to talk to a human and have a one on one personal relationship, so how about that! Of course, they are in business to make a profit, but since their focus is on minimising costs, finding workable solutions for their clients and working hard to ensure you have a successful outcome, most of the smart people are no longer using banks, and neither should you because you are smart as well!

But how complicated is it?

It’s all very easy in fact. All you do is open up an online account with someone like Worldwide Currencies in London, regardless of where you live, wire your funds across in the same currency (in other words if you are exchanging US$ to GBP then you have your local bank send US$ so there is no conversion at this stage). You will also liaise with your private account manager to agree when the funds will be converted and at what rate, then instruct them where to send it. You will be charged no fees and no commissions, and you will save typically between up to 4% of the amount exchanged compared to what your typical high street bank would charge.

Using the earlier example, with a foreign exchange company, you might get a rate of 1.52 which would mean that you pocket £6,578.94. This is a saving of £168.69 which represents 2.57%.

If you are making a one-off transfer, or monthly payments don’t ever use your bank again and save yourself lot of time and money!

Have you got any other tips for managing your money while living abroad? Let us know your tips in the comments!

photo of author
Written by Phill Ridgway
who writes a blog about personal finance in his own unique style and with frankness and honesty. He is also a Director and Financial Planner at Bridgewater Worldwide which specialises in helping international teachers to change the way they think about their hard earned money.
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