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Foreign currency
Consumers often waste thousands of pounds by using their bank to send money abroad.
Major institutions often add large fees and offer poor exchange rates when transferring money to an overseas account. Instead, it is usually worth using a specialist currency broker as many levy no fees and offer far better rates.
Anyone moving cash to buy a home abroad, to pay their overseas mortgage or who is sending money to an account in another country for whatever reason will save large chunks even with a small difference in exchange rate.
Why the rate matters
Imagine you are moving £100,000 to Spain. Say a currency broker gives you a rate of €1.22 to the pound, you will get €122,000. If a bank gives a €1.2 rate, you will get €120,000 – a huge €2,000 difference, before considering any extra charges it may add.
Even then, that comparison is a conservative one as you are getting a 1.6% better rate via a broker in that example, whereas the difference can be up to 4%.
That said, don’t completely write off banks. Some do special deals for sending money to certain countries, particularly in territories where they have a link.
It doesn’t mean they will offer better value than currency brokers; just make sure you check both options first.
Sometimes, when sending smaller sums it is worth using specialist internet firms, that often beat the banks again, because not all currency brokers offer their best rates on transfers when the amount is less than a few thousand pounds.
Buying holiday money
If you need hard currency in your hand for a holiday or any other reason it also pays to shop around.
The worst place to buy currency is at the airport because you are a captive audience so firms get away with charging sky-high rates.
The best deals are often found online or on the high street, while banks often score poorly in this respect because of their high charges.
Speaking of fees, don’t be fooled by firms that boast about 0% fees or commission because the exchange rate is as important, if not more important, especially on larger purchases. Always ask how much currency will you get with your pounds after all charges to find out the best deal.
Know the risks
Before moving money overseas or buying foreign currency, do a check on the company you plan to use because the industry is not always properly regulated and there is no statutory compensation scheme in place that guarantees your cash if something goes wrong.
This message is particularly pertinent following the collapse of Crown Currency Exchange in late 2010, which left 13,000 customers with combined losses of £20 million.
So, if the company is holding any of your cash (not a concern if you instantly receive overseas currency on payment of your pounds) some of the issues to check are:
1.    Is it regulated by the Financial Services Authority? Some firms are only registered, not regulated, which offers little protection. Firms regulated for currency purposes must keep clients’ cash in a separate account to its business funds to protect the money were the company to go bust.
2.    How long has it been in business?
3.    Does it have audited accounts at Companies House?

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