Simple… non-bank providers are able to offer rates and services that the high street banks find difficult to deliver. Foreign exchange is an additional service which banks offer to their clientele by default, whereas non-bank providers, such as Currencies Direct, focus on foreign exchange and are able to buy large sums of currency at commercial rates. On average, non-bank providers are able to save clients between 2 – 3% on the rate of exchange.

An exchange rate is similar in some respects to an interest rate. At the moment UK interest rates are low (0.5%). Banks, however, will still mark up the cost of borrowing by 3 to 6% because charging you more to borrow or buy is how they make their money. In the same way, the published exchange rates we see online or in the print media show the price at which the Bank of England Publish before marking up the cost of buying or selling. Commonly referred to as the ‘Mid-Price’, the published rate is a rolling average between buying euros at inter-bank level and selling euros at inter-bank level.

The Mid-price is the most accurate tool for an individual to gauge how competitive a bank, broker or bureau is, because the closer they get to that Mid-rate the more euros you will get for your pounds; or the less euros you have to pay to buy a pound if you are converting to sterling. You save by using a specialist because a bank will sell to a currency broker at a far better rate than they will to you. Remember that for every trade/transfer there is a buyer and a seller and, put simply, a specialist firm will buy more than an individual.

A non-bank provider / broker can buy Euros for you, and pass on the saving made by buying in larger quantities. Like the bank, the broker marks up the cost of buying a Euro before he sells it to you, but because he bought it for less he can sell it for less.

True rates……

With an increase in the number of non-bank providers in the market, it is advisable to be cautious of those which you decide to use. Making a comparison of companies can be risky as there are some providers who will quote the ‘Mid-Price’ (interbank rate) to get you to register or ‘sign up’ with them and then when you have opened your account and are ready to trade you will be given true rates as opposed to those originally quoted. Don’t be harassed into making a trade, if the company is to forceful feel very free to back off…..

Another Interesting Fact: Most high street banks require you to go to a branch to authorise the payment and when you get a rate from the branch it will be indicative. True rates will only be shown to you when you get your statement!

You can save real money. Each provider has different structures so you need to ask Currencies Direct will not place charges on transfers over £5,000. With property purchases you can generally save up to 3% on the cost of the property. Regular transfers and fixed regular transfers can save additional costs and as for forward contracts, when the rate is in your favour, you can fix it for up to 2 years.

In the long term these solutions can potentially save you thousands and can provide you with a means of budgeting. Fluctuating rates of exchange mean the difference between losing or securing your dream home within your budget. Book a forward contract, sit back and relax whilst knowing the exact cost of your house overseas.

Since the 1st November 2009 the F.S.A. has authorized certain FX dealers as ‘Payment Specialists’. Those complying with FSA regulations will have segregated client accounts. This would mean that evening the unlikely event of ‘going under’ YOUR money is NOT considered as company funds and is SAFE’. If in doubt check on the FSA website…

http://www.fsa.gov.uk/register/psdFirmMainSearch.do

Money Laundering Laws… Non-bank providers are also regulated by the ‘HRH Customs and Excise’ in terms of anti-money laundering laws. Providers have to conduct checks on clients in order to ensure you are who you say you are…..If you live in the UK, a simple registration form is needed, and the rest can be confirmed electronically. Those outside the UK will need to complete a registration form, supply a clear copy of your passport and proof of residence (dated in the last 3 months). This information can all be sent by electronic mail with the aid of a scanner.

Most providers work on a no obligation, no fees for opening / closing or not transferring money. But it is advisable to check with the specific company of choice. The account can be put in place and you use it as and when you have requirements.