Foreign Exchange

Foreign Exchange

Most expats find the need to transfer money internationally arises frequently, pitting us against currency exchange rates and seeing our money siphoned off in fees.

If your salary or pension is paid in your home currency, this is useful for saving money that can be used when you return home. However, if you convert it to the local currency where you reside, or you’re paid in the local currency and send money home, you will likely be losing out through transfer fees, if not also exchange rates. In this situation, it pays to be well informed of currency fluctuations.

Exchange rates are directly linked to economic performance and currency trades in a similar way to stocks and shares. The more attractive the currency, the more it is in demand and the greater its value. Of course, the opposite is also true which leads to the currency being devalued.

For example, the Euro has lost approximately 21% against the dollar in the 5 years Q1/2014 – Q1/2019, while Sterling has gained approximately 22%. In simple terms, if your salary is paid in USD (or a pegged currency), Euro savings have cost less year-on-year, while Sterling savings have cost more. Those of us saving in Sterling most certainly have found living in the UAE becoming more expensive and may have begun to erode our savings in order to maintain a suitable quality of life. Over the medium term, or even the short term, this isn’t sustainable and makes expat living a lot less attractive.

Other reasons for transferring money include making regular payments such as a mortgage and other bills, school or university fees, insurance premiums and the like, and lump sum transfers for investments.

For pensions, there are options to counter currency risks including QROPS, QNUPS and SIPP.

Let’s examine some other methods of foreign exchange:

Instant transfers

  • Service providers such as Western Union or Moneygram offer convenience but at a high price in terms of fees and exchange rates. Best used for emergencies and small amounts only.


  • Some international banks offer free transfers. However, the sender and the receiver must both have a qualifying account within the same bank.
  • Multi-currency accounts eliminate the need for several accounts. You can hold your money in multiple currencies all in one place and switch between them when the rates are good. You may be able to make and receive transfers in foreign currencies for free or reduced fees compared to regular international bank transfers. However, it pays to familiarize yourself with the associated fees when considering if this type of account will work for you.
  • Regular international bank transfers (“wires”, “telegraphic transfers”) are generally to be avoided due to the high fees, exchange rate mark-ups and length of processing time (days, or even weeks), although it’s best to consult with your bank in case of any special offers, or even just to benchmark an alternative option.

Online transfer companies

  • There are many online companies that allow you to make transfers directly from your bank account, or via an online account. These companies usually offer competitive rates and transaction fees, with short processing times.
  • However, your money may be at risk if the company goes bust during the transaction. Check the FCA register to find out how a firm is regulated.

Pre-paid credit and debit cards

  • These specialist pre-paid cards allow you to get the best possible exchange rate anywhere in the world, with low or no withdrawal fees in local currencies. They can be used the same as a regular credit card, but without the transaction fees and poor exchange rates of your regular bank’s cards.
  • Such cards are low-risk and extremely useful for day-to-day spending, or maintaining a relative (such as a child at university).

Specialized brokers

  • For significant amounts or recurring sums, using an FX broker is the best option. Brokers make their profits by trading in high volumes, meaning they can offer customers wholesale exchange rates (up to 5% cheaper than banks) and often fee-free transfers through their local bank account networks.
  • FX brokers typically offer more transparency than other options, with calculators on their websites that show you the total estimated costs, exchange rate, and exact amount you will receive after the transfer.
  • FX brokers offer support and value-added services, such as locking in a long-term exchange rate for recurring transfers.
  • If your money transfer doesn’t need to be rushed, you can also create a ‘limit order’ or set a desired exchange rate to target. This essentially lets you nominate your ideal exchange rate, and you will be contacted when the currency hits that rate.

We recommend FairFX for your FX needs. Check their website for great content and tools for expats and frequent travelers.

It quite literally pays to have a forex strategy, in order to retain the maximum possible of your money. The optimum strategy usually involves a mixture of transaction types depending on the purpose of the transfer. Our consultants are currency management experts, well versed in forex mechanisms. Request a consultation with us to review your needs and receive independent advice to help ensure that your exposure to currency risks is minimized.

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