Currency Exchange Problem
Oct 14th 2014, 9:06 pm
#46
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Joined: Oct 2014
Posts: 2
Re: Currency Exchange Problem
Continuing... I did not mean that they pretend that the fee is part of the exchange rate, but rather that they pretend that the fee is the *transaction cost* of doing the transaction when in fact the wide spread on the transaction means that you buy your FX at a rate that is far from fair value. So, the greatest *transaction cost* of doing the transaction is the wide spread (maybe thousands of USD), not the fixed fee (maybe USD100).
My experience with major banks is that they will not do the transaction at a rate close to the mid spread rate.
The proof of the pudding is in the eating. The best way to check this is to call your bank and an FX conversion firm (. <<<snip>>> within minutes of each other. Tell them you have USD400,000 in a USD-denominated account at Lloyds (I am guessing the amount here) and ask them how many pounds they will give you after all fees are accounted for. I am guessing the bank and the FX firm will differ by GBP4,000-5,000 on this amount. The bank will exchange at 2.5% away from the mid-spread rate and the FX firm will convert at 0.675% away from the mid-spread rate.
If you are worried about the firm going belly up during the trade, you could do it in bits. USD100,000 at a time, say. Putting less money at risk per transaction.
My experience with major banks is that they will not do the transaction at a rate close to the mid spread rate.
The proof of the pudding is in the eating. The best way to check this is to call your bank and an FX conversion firm (. <<<snip>>> within minutes of each other. Tell them you have USD400,000 in a USD-denominated account at Lloyds (I am guessing the amount here) and ask them how many pounds they will give you after all fees are accounted for. I am guessing the bank and the FX firm will differ by GBP4,000-5,000 on this amount. The bank will exchange at 2.5% away from the mid-spread rate and the FX firm will convert at 0.675% away from the mid-spread rate.
If you are worried about the firm going belly up during the trade, you could do it in bits. USD100,000 at a time, say. Putting less money at risk per transaction.
Last edited by Jerseygirl; Oct 14th 2014 at 11:15 pm. Reason: Rules remived
Oct 14th 2014, 9:20 pm
#47
Lost in BE Cyberspace
Thread Starter
Joined: Jan 2008
Posts: 41,518
Re: Currency Exchange Problem
I will probably use a FX company when I eventually get it here. I think your figures are about right for the difference between the bank and FX co rate based on research so far.
Oct 14th 2014, 9:28 pm
#48
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Joined: Jan 2008
Location: The Charente - still smiling.
Posts: 2,624
Re: Currency Exchange Problem
Continuing... I did not mean that they pretend that the fee is part of the exchange rate, but rather that they pretend that the fee is the *transaction cost* of doing the transaction when in fact the wide spread on the transaction means that you buy your FX at a rate that is far from fair value. So, the greatest *transaction cost* of doing the transaction is the wide spread (maybe thousands of USD), not the fixed fee (maybe USD100).
My experience with major banks is that they will not do the transaction at a rate close to the mid spread rate.
The proof of the pudding is in the eating. The best way to check this is to call your bank and an FX conversion firm within minutes of each other. Tell them you have USD400,000 in a USD-denominated account at Lloyds (I am guessing the amount here) and ask them how many pounds they will give you after all fees are accounted for. I am guessing the bank and the FX firm will differ by GBP4,000-5,000 on this amount. The bank will exchange at 2.5% away from the mid-spread rate and the FX firm will convert at 0.675% away from the mid-spread rate.
If you are worried about the firm going belly up during the trade, you could do it in bits. USD100,000 at a time, say. Putting less money at risk per transaction.
My experience with major banks is that they will not do the transaction at a rate close to the mid spread rate.
The proof of the pudding is in the eating. The best way to check this is to call your bank and an FX conversion firm within minutes of each other. Tell them you have USD400,000 in a USD-denominated account at Lloyds (I am guessing the amount here) and ask them how many pounds they will give you after all fees are accounted for. I am guessing the bank and the FX firm will differ by GBP4,000-5,000 on this amount. The bank will exchange at 2.5% away from the mid-spread rate and the FX firm will convert at 0.675% away from the mid-spread rate.
If you are worried about the firm going belly up during the trade, you could do it in bits. USD100,000 at a time, say. Putting less money at risk per transaction.
Or of course do it in smaller lumps and with different firms. Takes a bit of time but the return per hour is quite good
Last edited by Jerseygirl; Oct 14th 2014 at 11:16 pm. Reason: Edit to quote
Oct 14th 2014, 10:12 pm
#49
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Joined: Oct 2014
Location: Sydney, Australia
Posts: 6
Re: Currency Exchange Problem
Sally another advantage of using a FX company is that you can avoid opening a costly and time consuming foreign currency denomination account as you would need with the bank. Simply send the USD funds direct to the fx company's USD account and they will convert to GBP for you. As another poster mentioned as long as the FX company has U.S and UK office and you are a resident of either it shouldn't be a problem.
Like purchasing anything the more research you do and the more knowledge you obtain the better the deal you will get. Currency is no different.
Like purchasing anything the more research you do and the more knowledge you obtain the better the deal you will get. Currency is no different.
Oct 15th 2014, 5:45 pm
#50
Ping-ponger
Joined: Jul 2002
Location: Dreich Alba
Posts: 12,006
Re: Currency Exchange Problem
In the meantime, the £/$ keeps going down - mid-rate below $1.59. 
(Please, no nit-picking on whether it is going "down" or "up").
(Please, no nit-picking on whether it is going "down" or "up").
Oct 15th 2014, 7:19 pm
#52
Lost in BE Cyberspace
Thread Starter
Joined: Jan 2008
Posts: 41,518
Re: Currency Exchange Problem
Sally another advantage of using a FX company is that you can avoid opening a costly and time consuming foreign currency denomination account as you would need with the bank. Simply send the USD funds direct to the fx company's USD account and they will convert to GBP for you. As another poster mentioned as long as the FX company has U.S and UK office and you are a resident of either it shouldn't be a problem.
Like purchasing anything the more research you do and the more knowledge you obtain the better the deal you will get. Currency is no different.
Like purchasing anything the more research you do and the more knowledge you obtain the better the deal you will get. Currency is no different.
Oct 16th 2014, 10:05 pm
#57
Lost in BE Cyberspace
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Joined: Jan 2008
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Re: Currency Exchange Problem
Well that was fun. Transferred it to my son, and he's just been in to WF to wire it to Lloyds.
Apparently the employee said, "I've never done this before" which was a great start. Then they asked him a lot of security questions which son said were kind of odd trick questions. Then they rang me up to confirm. I suppose they do have to check but it was kind of tense. Money has disappeared into the ether so hope it's going to turn up in the right place.
Apparently the employee said, "I've never done this before" which was a great start. Then they asked him a lot of security questions which son said were kind of odd trick questions. Then they rang me up to confirm. I suppose they do have to check but it was kind of tense. Money has disappeared into the ether so hope it's going to turn up in the right place.
Oct 17th 2014, 6:42 am
#58
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Joined: Jul 2008
Posts: 1,477
Re: Currency Exchange Problem
So did you take my advice after all?
Oct 17th 2014, 7:25 am
#60
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Posts: 41,518
Re: Currency Exchange Problem
It's not a million dollars, but this keeps running through my mind 
James Brown – Cant Take It With You (The Breakbeat Junkie Remix) |
James Brown – Cant Take It With You (The Breakbeat Junkie Remix) |