A reader has asked: Do currency brokers give better exchange rates?
The quick answer here is yes they do. It is possible to save a huge amount of money on foreign exchange and international money transfers by using a currency broker.
Currency brokers really only exist for two reasons:
- Bank account exchange rates are still ludicrously expensive
- They offer things that bank accounts do not, such as timed execution and forward contracts
Why are banks still so expensive for foreign exchange?
Banks can charge up to 4% for currency conversions. This is very expensive considering currency brokers charge much less with rates normally below 1% from the mid-market. The reason banks do this is simply that they can.
For people receiving foreign currency into a UK bank account it gets converted automatically into GBP. By the time anyone has figured out the rate it is too late.
For people sending large amounts of currency abroad, banks charge more than currency brokers because you’ve already got an account with them. So the options are either to open a separate account with a currency broker, or go with your bank for ease. You will pay a huge amount for that laziness though.
How to make sure you get the best exchange rate from a currency broker
Currency brokers do give better exchange rates than banks, but you must be aware that some are better than others. Pricing in foreign exchange is still very opaque because few understand how rates are calculated. To ensure you get the best exchange rate from a currency broker read our guides:
One final note is to always ask these questions when dealing with a currency broker:
- What percentage will my exchange rate be from the mid-market?
- Is that rate fixed?
You can compare currency broker and exchange rates in our currency broker comparison table.