Why Are People Shopping for Better-Than-Bank Rates?

If your aim is to find the best foreign exchange rates for bank transfers to an account abroad or domestically, then you already know how much finding a better fx rates than the bank’s is going to save you.

As a rough estimate using a bank-alternative provider can save customers from regions such as UK, USA, Australia, Asia or EU…

MORE THAN 50% of all associated bank transfer costs,

Together with several other benefits which we will briefly touch in this guide.

Best FX Rates for Bank Transfers Currently (Bank Alternatives)

We recommend look at our lists of best international money transfer companies and currency brokers by overall rating where we factored in the fees, exchange rates, and other factors to determine which is the best provider overall.

We believe this is the most recommended method, particularly if you have large requirements.

How exchange rates work

The official currency exchange rate is the real mid-market price in which banks trade currency in between themselves or the central bank. W

Currencies trade in the same fashion as other assets, so by mid-market we mean the price of the last deal that was made.

When you’re reading the morning news, or hearing some gloom and doom story over the television, when reports would mention “the rate” or the “official exchange rate” they mean exactly that.

The interbank or mid-market rate. The acceptable rate as reflected by the latest deal between banks. The official interbank is not the best forex rate achievable for private clients.

Markup: The Bank’s Buy and Sell Rate

However, that interbank exchange  rate is not the same as the foreign exchange rates offered to private or corporate clients.

Even a very large corporation, trading massive amounts of foreign exchange, using the best money transfer company or a bank’s corporate desk, isn’t going to get the exact interbank rate. Just like with any service there are costs to provide it – whether that be the investment in the currency trading infrastructure, regulatory and compliance requirements or simply staff costs we have to understand banks aren’t able to provide the service for nothing.

There will always be a SPREAD added into the mix, and our only gripe is that banks are often charging a far higher spread than is necessary to cover their costs and make a small profit.

The spread is usually shown in percentages.

A 0.5% spread means the amount of foreign currency you’ll receive in the deal will be 0.5% less of what you would have received if you were trading at official interbank exchange rates.

In almost all cases, both for private individuals and most businesses, the banks exchange rates are the worst on offer.

This is because a standard bank spread in the UK will be between 2-3% (for pairs like Pound v Euro or Pound v Dollar, or an even higher spread potentially for trades involving more exotic currencies).

View the current daily exchange rates

🔥 Customers Don’t Know What Exchange Rates Are 🔥

View this survey to learn most Australian customers don’t even know what bank exchange rates are and how markups work.

Buy/Sell currency spreads existing in cryptocurrencies too

Similarly to fiat currency exchanges, cryptocurrency brokers, exchanges, and sellers are also embedding a markup into their sales.

Some customers believe they can circumvent the costs of foreign exchange by using cryptocurrencies such as Bitcoin, , Ripple, ethereum or Cardano for international transfers, but the truth is that the costs of exchanging fiat money for crypto as even higher than the cost of exchanging domestic money into foreign currency.

While we have shown above that the best foreign exchange rate for businesses with WorldFirst will cost 0.15% to 0.5% per exchange, popular cryptocurrency exchanges would charge between 1.5% (using PayPal’s new Crypto option) and 5% (most local Crypto brokers), per exchange of GBPBTC/GBPETH or any other pairing.

Approximated Best Exchange Rates Possible (Vs Banks)

* Current rates provided to us by external provider, updated hourly.
** Represeting a 2%-3% bank margin, which is the average bank margin in the UK for internaional currency exchanges based on our indepedent research.
*** Representing a margin of 0.5% to 1% which is the average margin for most trades with brokerages.

Flexible Spreads with Brokerages

As mentioned in the above section the price you will be paying for your transfer in the form of foreign exchange spreads (the bank’s or the provider’s “offered exchange rate” is actually consisting of a spread integrated into it) will vary based on the circumstances of your trade.

First off there is a different spread altogether which varies between a spot trade (exchange money today) and a forward contract (pay a deposit on a transfer that will take place years into the future with a fixed exchange rate).

Secondly, some currencies are just more expensive than other to handle.

Major currencies as per definition such as the following pairings: EURUSD, USDJPY, GBPUSD, AUDUSD, USDCAD, USDCHF, NZDUSD are going to, on average, be less costly than exotic currencies.

Example of exotic currency pairings would be GBPAED, EURAED, GBPILS, GBPZAR, and these on average have slightly higher spreads because they are less “liquid” i.e. associated with more costs and risks for the bank or provider (this is how foreign exchnge companies make money, and they have to be careful not to take unnceseccary fx risks themselves).

Thirdly, brokers tend to offer better deals based on volumes.

The best foreign exchange rates offered to someone exchanging or transferring £10,000 will not be as to someone exchanging £100,000.

Moreover, one of the advantages of moving big volumes is that it’s possible to negotiate the exchange rate offered.

The best way to do that  first off get a quote from your bank but the way banks obfuscate the actual exchange rates offered could be tricky, so this stage can be skipped. The next stage, would be to get a clear quote from another broker (or multiple brokerages) so you’d have a idea where you’re standing.

You could also easily colate exchange rate quotes easily enough through online money transfer providers which are cheap and straightforward (but you should know that in some cases brokers won’t be able to match an fx rate that good, and it could still “make sense” to use a broker considering the added values of using a broker vs an online platform, in spite of not obtaining the absolute optimal exchange rate obtainable at the moment).

Rate Alerts – A Powerful Tool

One added value when using a currency broker is to have the ability to subscribe to the exchange rates.

For example, if you want to exchange Euro to USD, but that is not an urgent requirement and you are waiting until the EURUSD exchange rate will improve, you can set up a rate alert – a nifty little tool that you can either setup online or through your dedicated currency dealer, in which you ask to execute a certain trade when a certain rate level was reached.

As much as having lower spreads i.e. obtaining the best fx rate possible of all banks and providers, matter, trading currencies as the right timing could save up as much money for you.

Check Your Spreads on Each Trade

The fact a certain broker made a deal with you with a certain margin you were happy with does not mean the broker will continue to honour the same spreads on each trade you made (unless you have been directly communicated that, which would be very rare of a broker to commit considering their own costs and risks can change over time and impact their spreads.

That means it would be a good idea to check for each individual trade what was the margin that was applied and whether the exchange rates offered by that broker are still the best in the market.

As recommended in this guide, it is never a bad idea to contact another broker, compare the rates, and potentially go back to your broker to renegotiate the exchange rate markups applied to your trades.

Best Euro, USD, AUD and Sterling Rates: Same Path to Follow

It doesn’t matter if you try to find the best bank exchange rates for your Pound Sterling, Euro, Dollar or any other currency because the options we have covered on this guide will handle the majority of currencies and countries.

You will have to follow the same path to obtain the best gbpeur rate, the best gbpusd rate, the best eurusd rate, or any other currency pairing.

How to Make Currency Predictions?

One of the absolute best ways to obtain the best currency exchange rate for your tranfer or trade is to simply make the transaction at the optimal timing in which the relative currency exchagne rate between the currency you are exchanging and the currency you are receiving is the highest.

For example, if you traded your GBP to EUR on August 22, 2022, you would have had the best rate of that year (about 1.20). Simply by trading at another time, say a month later circa Sept 11, 2022, you would have only received 1.11 Euro for each Pound Sterling traded. In other words, within 1 month apart, you could have as much as 10% different on the exchange rates.

As mentioned above, rate alerts can be a really good idea to stay in tune with the market and particularly since you can set it to notify you only on specific currency pairings, the tool by itself does not give you forward judgement on the currency rate, it just tells you what’s the current rate.

It can be difficult and tricky to make accurate predictions regarding currency exchange rates, but it may be possible.

There are certain things to learn and here are some useful guides on learning how currencies behave and work.

How to Fix the Best Exchange Rate?

If you believe that you are currently enjoying the best USD rate, for example, against the Pound Sterling, then you could switch from Spot Contract (trading currencies right now) into a Forward Contract (fixing current rates for a period of between months and years moving forward).

Hedging tools like Forward can be a very useful tool in the array of the currency trader, and are very heavily used by international companeis and HNW.

It is for the most part, a useful tool to protect against volatility and uncertainty.

Best Exchange Rates for Travelers

Wise Multi-Currency Card

The aforementioned Wise offers more functionality for its customes than a simple online money transfer service with superb foreign exchange rates.

It also enables customers to collect payments from abroad and store funds in 8 different currencies on their Wise international account.

In practice, Wise’s multi-currency account is a form of a virtual bank account – and the kicker is, for travelers specifically, that customers in UK, EU, USA and Australia (as well as multiple other countries) are able to issue a multi-currency card attached to that virtual bank account.

That card has no FX exchange rate fees and debits one’s wise account automatically.

For example, if you are in the UK and traveling to Europe, you could get the best GBPEUR exchange rate by transferring money to your Wise account, exchange it to Euros, and then spend it in Euros via the Wise Multi-Currency Account and Debit Card.