The United Nations currently recognizes 180 currencies worldwide. This means that if you plan on travelling, chances are you’re going to need to exchange your currency.
Put simply, Foreign Exchange (FX) is the buying or selling of one currency for another, but sometimes it can get a little confusing.
It’s very important to have an understanding of FX rates and how they work. If you don’t, it’s easier for you to get ripped off when exchanging currencies.
Banks and other financial institutions tend to charge you unnecessarily high exchange rates, in order to make a markup. Banks are technically financial institutions that have the legal grounds to sell foreign currencies. However, they still need to make a profit somewhere in the equation. They do this by creating a markup.
Think of FX businesses and banks like retailers; your favourite boots may be sold to the retailer for $50 dollars from the warehouse, but when you purchase it from the retailer itself, it will probably be closer to $75 or $100 such that additional profit is made.
Say you’re trying to exchange $100 Canadian to American currency; the current real-time market exchange rate on Google– with no markups– is 1:0.75 as of today, January 8th at 9:28 am. Therefore, $100 CAD is equivalent to $75 USD, since the US dollar is economically worth more.
However, when you exchange currencies through your bank, they will give you a rate closer to 1:0.7, such that you only receive $70 USD, and the additional five dollars that you should have received goes in their pockets.
Essentially, you never get the amount you ought to because of high costs loaded upfront by your bank.
And if you’re interested in sending money to another country through a bank, most will sell you a rate that is marked up in addition to complicated service and handling fees.
These additional fees can be a percentage deducted from the total payout. They can be an unreasonably high flat fee. But, in most situations, they are both! And, they can take up to 15 days to process a payment.
If you’re looking to exchange currency, the better option would be to go through an online service. Here’s why:
Lock In Rates Whenever They Arise
The FX market is always changing. This is because, depending on each country’s balance of trade, the value of their currency will drop or rise. That means exchange rates are always changing, and a favourable rate may present itself for a short period of time before hiking up again.
A prime example is how the British Pound recently took a huge dip when the United Kingdom decided to leave the European Union. According to CNN, Banks within the UK have begun shifting trillions of dollars in assets to other countries in Europe in order to ensure their money doesn’t lose its value.
If you have money invested in the UK, now would be a good time to take advantage of a good FX rate before the pound drops even further, causing you to lose more money.
The chances of missing out on a good rate are much greater if you are relying on a bank. When you use an online service to exchange currency, you are able to lock in a fixed rate in real-time wherever you are without having to manually walk into a bank during their operational hours, which are generally quite short and inconvenient.
Most online FX services operate around all hours of the clock. This ensures that you can exchange currency whenever it fits best for you without having to physically walk into a bank. Plus, you will also have access to online or call service representatives if you need any help.
Online currency exchange platforms are generally much easier to use from the ease of your own home than it would be going to your local bank. According to Investopedia, people interpret their money and rates better when they see it visually presented in front of them as opposed to verbally speaking with a teller at a bank.
Trades can also be easily entered and exited, with the ability to create automated alerts that inform you whenever a good rate arises. This way, people can handle their money easier without having to go through the stress that you normally would have if you went to a bank.
What’s The Best Way To Exchange Currency?
At REMITR, we can solve all your FX needs. We offer you 24/7 access to some of the best rates around. You can exchange commonly used currencies whenever you want, without the hassle of going to your bank.
For a flat fee of only $5 CAD, you can send money online to 150+ countries worldwide with no additional handling fees or charges. It’s guaranteed that your money transfer will be received within one business day.
Get registered with REMITR and get exclusive currency exchange rates today.