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Best way to avoid fx hit when transferring money into sterling account

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  • 24-06-2012 3:49pm
    #1
    take everything
    Registered Users Posts: 9,805 ✭✭✭


    Hi.
    I am about to transfer a sizeable amount into a Sterling account. The account will probably be a Nationwide UK sterling account. What's the best way to avoid losing money when doing this.
    Is it lodge a sterling cheque.
    Or transfer from my euro Nationwide account.
    I could be wrong but i think Nationwide UK Sterling accounts have a spread of 1.25% either way (whatever this means :pac:). Is this favourable or should i get it exchanged to sterling before i lodge the money.
    Thanks.


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    #2
    magooly
    Registered Users Posts: 159 ✭✭magooly


    http://currencyfair.com/ I use this all the time, £3 fee and that's it!


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    #3
    JTMan
    Registered Users Posts: 5,540 ✭✭✭JTMan


    KBC pay 3.00% on GBP accounts, which are open to RoI applications. A lot more than Nationwide UK.


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    #4
    srsly78
    Registered Users Posts: 7,157 ✭✭✭srsly78


    magooly wrote: »
    http://currencyfair.com/ I use this all the time, £3 fee and that's it!

    Not quite that simple. I always check currencyfair but the rates are never quite the best. Even with the (small) spread charged by my broker I get a better rate than currencyfair. This is only viable for large amounts however.

    One thing is for sure, don't use your bank to do FX :pac: Their spreads are the worst! Note that some of them even refuse to publish these spreads (Ulster Bank is one). You actually have to work out their spread by reverse-engineering the transaction and comparing to current rates :mad: Most Irish banks seem to apply a 5% spread - which is brutal -.-

    Some credit cards can be good for FX, but not all are the same (even between 2 different mastercards for example). All the cards offered by Irish banks are certainly bad for this. I heard American Express gave the best rates, but they aren't accepted everywhere and seem to have fallen out of fashion.

    In case anyone is wondering, here is simplified explanation about "spreads":
    Say the "currency market" is selling GBP£1 at e1.24. This is the "big boys" market, with massive amounts of transactions and complicated instruments like fx swaptions etc - not many of us ever experience this. We go through a middleman like our bank or fx broker.

    So the market is selling GBP£1 at e1.24... But the bank won't offer you this rate, they will offer you something like e1.20. The difference (e0.04) here is their "spread", and is how they make money on FX. Don't be fooled about them claiming "no fees" - the fees are peanuts compared to the amount they make off their spreads, which can be quite large in many cases.

    Alternative explanation: Spread is the difference between the wholesale FX rate and the rate the FX provider offers to it's customers.

    Note about CurrencyFair: This website acts as a marketmaker, matching buyers and sellers. There is no spread at all! This is great right? In theory yes... But in reality it doesn't compete with the sophistication of the "real market" which has a lot more participants and transactions. Online market-makers like CF are definitely the future tho.

    (I live in Ireland but get paid Sterling by main client in the UK, so FX is very important to me. I shop around with several dedicated brokers trying to find the best rate, also I save up sterling to move bulk amounts which gets me reduced spreads. )


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    #5
    dobsdave
    Closed Accounts Posts: 1,814 ✭✭✭dobsdave


    Where are these brokers?
    Can it all be done online?
    How long does it take from account to account?
    Can you quantify large amount please

    Thanks


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    #6
    srsly78
    Registered Users Posts: 7,157 ✭✭✭srsly78


    All online (or telephone if you prefer to interact with a human). Account to account takes as long as a normal bank transfer takes (in my case 24 hours from UK account to Irish account). To sign up all you need is proof of address and ID - the usual KYC requirements (know your customer).

    There are lots of brokers to choose from, just google for "fx broker" - I am deliberately refraining from advertising any one company's service.

    In my brokers case the spread narrows at £15000, and then again at £100000 - this isn't something they advertise, had to find it out the sneaky way (get a quote for 15000, then get quote for 15001, notice big difference).

    Note that even for small amounts it's still a lot more competitive than what the banks offer...


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