Currency is a topic that isn’t talked about much when it comes to money-saving tips. However, with the rise of global e-commerce and remote working, individuals, freelancers, and small businesses are all affected by foreign currency. Our approach to currency can make a massive difference in our income and expenses, and how we tackle this can be as simple as just using one of Australia’s top 5 best currency brokers instead of a bank.
However, let’s first explore how and why using the best currency transfer in Australia is such a big deal.
How finding the best currency transfer can save you money
Below are the various ways in which using the best currency transfer can save – and even make – you money.
The first thing we think of when talking about currency is “is the exchange rate good?”. If you’re using a high street bank, you can almost guarantee the answer to that is a resounding “No”. One of the ways intermediaries make money is from the spread between the buy and sell price of a currency, and the larger this is, the worse rate you’re getting as a customer.
For reference, the “real” exchange rate is called the interbank rate, which is what most banks have access to. However, the average spread applied to customers among high street banks is between 3% and 5%. Meaning you could be getting 5% less USD in your exchange than you should be.
Some of the best currency brokers (FX specialists, not banks) have a spread as low as 0%, meaning the customer can access the perfect exchange rate. 0.5% to 1% is more common, though, and is still considered to be competitive. When exchanging to $100,000 annually, this could mean losing $500 (0.5% margin) instead of $5,000 (5%). This could be the difference between keeping your business solvent or investing $4,500 extra into your pension.
Fees are slightly more upfront and outright cost, as opposed to an indirect loss of money. Whilst many firms try to hide the poor spread, it’s more difficult to hide the outright fees. These fees may be a percentage or flat. So, for most customers and currency routes, Wise has a 0.5% fee that is included in the price breakdown of every quote. Alternatively, it could be an AU$10 fee at some brokers, though this isn’t common.
Flat fees are more common among high street banks, which often charge AU$30/USD$30 as a flat fee for an international transfer. This fee may be related to the exchange itself or the fact it’s being sent across borders, but given that banks rarely offer multi-wallet accounts that can perform internal exchanges, the definition of the cost doesn’t really matter. Flat fees are terrible for smaller transfers, which could in theory cost more in fees than the value of the amount you’re sending.
Transparency is a huge part of getting stung when it comes to currency. Sometimes, the best currency transfer isn’t just the one that’s the cheapest, but it’s the one that is clear and transparent about pricing. This is something that many modern FX specialists are trying hard to get better at because it’s becoming a huge selling point in attracting new customers. Many Wise and Revolut customers know the app’s fees off by heart, but very few people can say the same about their own day-to-day bank – which is telling.
Finally, the last way in which you can save, or make, money from the best currency transfers is by using hedging. Hedging is something that is rarely offered at banks and can often feel inaccessible to smaller businesses and individuals. This is quickly changing, with many FX brokers offering basic hedging tools to anybody and everybody.
Hedging is when you sign a contract to buy X amount of a certain currency at a certain exchange rate (similar to the current one) but at a future date. This future date is important, as it means you’re hedging against the risk of the exchange rate changing down the line. But, as many people don’t have the money yet to exchange now (i.e. their future wages), they can set up forward contracts to ensure they don’t get hurt by a sudden depreciation in their relevant currency.
This is even more important at the moment with a lot of tense geopolitics, severe inflation, and with many economies on the brink of recession. All of these factors can create drastic swings in a currency, making even a 5% spread pale in comparison to the amount you could lose. One year ago, it only took 0.82 Euros to buy 1 USD. Today, it’s almost a 1:1 exchange rate. If you exchanged $100,000 from Euros in the past year, you could have saved over ~10,000 Euros if you had hedged it early on.
5 Mini Reviews – Best Currency Broker
Below are 5 of the best places to transfer foreign currency abroad.
TorFX is an industry veteran and highly reliable FX broker. With luxurious expat awards and offices located in Australia, UK, and Singapore, TorFX offers competitive money transfers for Australians via a new and improved website. Almost 60 currencies are supported and the mobile app is highly rated.
Formed in 2019, Send is a very new company – but this hasn’t stopped it from winning Mozo Experts Choice 2020 awards. Send has zero payment fees yet offers a free personal account manager to help you through transactions. The Australian company may only have 37 currencies, but its slick interface and competitive rates have made it incredibly popular in a short amount of time.
OFX is considered to be the gold standard for Australian money transfer companies. With a typical minimum send requirement of AU$100 (as per the previous two), foreign currency transfers are a breeze using the slick app and helpful 24/7 customer support. Bank accounts can be opened all across the world with no fees for transfers, 55 currencies, and great hedging tools.
XE can be a complicated business to assess because of its Euronet ownership and the recent merger with HiFX. However, you have likely come across its highly ranked website when it comes to offering highly accurate quotes. XE has 98 currencies supported, no minimum transfer, and offices in Australasia. They’re a big company and thus a reliable pick.
Unlike some of the others, Wise is not an Australian company but a British one. Whilst they still offer Australians great service, this is a good choice for British expats or those working with British firms. There’s no dedicated dealer, no hedging, and no discounts for high-volume transfers. But, they have a transparent 0.5% fee structure, incredible multi-wallet functionality, and an incredibly easy borderless spending card.