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Posted March 3rd, 2011 by Charles Purdy

Can you afford to lose £4,000?

By Charles Purdy, Director, Smart Currency Exchange

The economic crisis is certainly causing problems for people all over the world, yet in the world of international money transfers there are actions that can be taken to safeguard your money – especially if different currencies are required. International payments include payments between countries for property, the movement of pension payments, transferring savings or paying for any goods or services in a currency other than the one you have.

Working with an international payment specialist rather than using a bank will allow you to save money over using the bank AND provide you with options that can minimise financial losses.

Moving Large Lump Sums of Money Internationally
Do you need to pay a staged payment for a property? How about moving funds from the sale of a property abroad back to the UK? Regardless of the reason for moving money – or where you need to move it to – it’s important to realise that for every £100,000 you move, you could pay around £4,000 unnecessarily if you use a bank. Banks around the world add a margin of around 4% more than the margin used by an international payment specialist. Using a bank rather than a specialist is similar to buying a property and then asking if you can pay an extra £4,000 for no reason.

Apart from saving money on the cost of buying currency, you can also ensure that the value of the money you are moving doesn’t change. In other words, if you need to move a large sum of money within the next year and you are happy with the current exchange rate, you can reserve that rate today – yet pay for it at a later date.

For example, during the month of June 2010 Mr and Mrs Kingston needed to discuss a payment of €89,400 due in October 2010. They were happy with the rate of the day so they booked a contract for the full amount at a rate of €1.2250/£1 and simply paid a 5% deposit to secure the transaction. When October came, they sent the money due, less the 5% already paid. If, however, they had waited until the last minute to purchase the euros, they would have had to accept a rate of €1.12/£1 – one that would have meant paying an extra £6,841!

While the euro has lost ground since it was at parity (€1/£1) in December 2008, in the grand scheme of things it is still a fantastic time to purchase (or secure a rate for) euros to sterling. So, if you originally bought your euros at close to €1.50/£1 and you now want to bring the funds back, now is the time to think seriously about doing it – especially given that many analysts feel that sterling is likely to continue to strengthen towards €1.30/£1 with the developing debt crisis in the euro zone.

Moving Small Sums on a Regular Basis
If you are moving small sums of money on a regular basis, you can benefit greatly by fixing the currency exchange rate if and when the rate is at a good level. For example, in June 2010 many Brits living in Europe secured a rate of €1.22/£1 for monthly payments for a year on all of their pension payments. That means that as sterling weakened throughout the year, they were unaffected by the rate change and continued to receive a rate of €1.22/£1 each month.

In addition to saving money on getting better-than-bank exchange rates and fixing rates for future use, international payment specialists can also reduce the fees associated with transfers, shrink the transfer times from 5 days to 48 hours and provide a level of service that far surpasses the cold, impersonal bank. As for safety, specialists are strictly regulated by the Financial Services Association and process payments through a bank, negotiating a better rate of exchange with the bank and then passing the savings on to the client.

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It’s often the people that wait until the last minute that are forced into buying at the worst times – don’t let that be you. 

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