Currency Exchange Private Clients Information Library

CURRENCY EXCHANGE BROKERS - PRIVATE CLIENTS

What is a Currency Exchange Broker?

Currency exchange brokers are specialists for foreign transfers – whether you need to make regular bank – to – bank transfers to another country or just for a one-off transaction abroad. As specialists, foreign exchange brokers can ensure that your money goes from your Australian bank account to another currency account quickly, safely and at the best possible exchange rate.

While no commercial service can offer the Interbank exchange rate to its clients, the best currency exchange services can offer excellent rates that are very close to the Interbank rate. They will usually quote you the latest rate for the currency pair you wish to deal with (for example, the Australian Dollar and the Euro).

What is an Example of a Foreign Exchange Transfer?

You might need to send money to another currency account for all kinds of reasons. The most common reasons are:

• To pay for an overseas mortgage
• To send money to family / friends overseas
• To pay staff based abroad
• To deal with import/export product costs

There are plenty of other reasons besides these – including direct currency trading. Currency exchange brokers can offer direct trade platforms too, but these are different to the regular transfer account service that they can offer.

What is the Interbank rate?

The Interbank rate is the best rate on the foreign exchange market. It is the rate that you see on currency quote lists (see to the right of this page) and on currency converter tools. It is the best available rate – and yet us regular people cannot access it. The only entities that can access the Interbank rate are:

• Large banks when they trade with each other
• Other large financial institutions when they trade internally

Regular customers, including corporate clients and foreign exchange brokers and investors, cannot deal in the Interbank rate. However, the best foreign exchange brokers can offer a rate that is very close to the Interbank rate.

While banks can access the rate for internal trade, they won't offer the same rate to regular customers. Unlike foreign exchange specialists, they will take a larger chunk of the Interbank rate before passing the rest on to you – meaning you get a poorer rate as a result.

Currency brokers can offer a better rate for a variety of reasons – they don't have a presence on the high street so they have much lower overheads to deal with, plus they are dealing constantly with the forex market. They generally do not charge extras like commission or dealing fees, whereas many ordinary banks do.

Are there any Fees?

As mentioned, most currency exchange services do not include additional fees such as commission or dealing charges. However, they do often set a minimum benchmark transaction amount, below which there may be a flat fee.

This benchmark amount is usually between $1,000 and $5,000 depending on the broker. If you want to make a transfer below their benchmark, they may charge a flat fee (per transfer) of usually between $7 and $20. If your transfer is above that amount, it will usually cost nothing.

As the benchmarks and fee amounts vary, it is best to check in advance with an individual brokerage before going ahead, to make sure you are clear on every aspect of the transfer.

If you require smaller transfer amounts, then it is cheaper to use a Money Transfer service. These can deal with smaller amounts.

How Can I Set Up an Account?

Setting up a foreign exchange account is relatively easy – and once it is dealt with, you can contact your broker anytime to arrange a transfer. Most accounts are up and running, and ready for your first transfer within a few hours.

Use our comparison area to look at the brokers listed there. Weigh up which one might suit your individual needs – what is their minimum transfer amount (for free transfers)? Apply directly via the page – just click on More Info to fill out a short application request. A broker will then contact you directly to discuss your currency needs.

The set-up process usually involves:

• Your proof of ID (drivers license, passport) – scan and email
• Your proof of employment – scan and email a letter from your employer
• Bank details

They will need your bank details and the account you wish to send money to in order to arrange the transaction.

How to Make a Currency Transfer

Once your account has been set up and verified, you're ready to go! Anytime you need to make a currency transfer, simply contact your broker (via the phone or email) and they will ask you how much you want to send from A to B, and to which currency. They will then quote you their best rate for the nominated currency (for instance, the latest AUD/EUR rate for a transfer to a Euro account). If you are happy with the rate, then you will be able to go ahead with the transfer.

At this point the broker will send you a short online form, so that you can enter your recipient's bank details. Fill this out and email back to your broker so that they can initiate the transfer. They will confirm every step of the process. Once the transfer goes ahead, it should take arrive at its destination within 1 and 5 business days.

Can I Fix Exchange Rates?

Yes, you can. Your broker will be able to arrange a Forward Contract for you if you wish to fix an exchange rate, usually for up to 2 years. This is ideal if you want to arrange a future transfer, for instance payments for an overseas mortgage. By fixing the exchange rate now, you can be certain what the rate will be at a later date – a great way to limit your exposure to the movements of the exchange rate.