French foreign exchange planning can reduce your foreign exchange costs by over 4% per transaction and at the same time make your commitments in other currencies easier to manage.
French Foreign Exchange Planning Explained
If you have ongoing personal or business commitments in a foreign currency you are likely to need foreign exchange to be make and receive payments on a regular basis.
Using your bank to do this could cost you a small fortune in bank commission charges and bank transfer fees because the banks have long treated FX service as a “cash cow”: The situation was very clearly set out in this article from The Telegraph.
Foreign Exchange Planning Savings
If you presently make and receive your foreign exchange transfers by individual funds transfer using your bank or other High Street financial institution you will probably be paying 4% or more than you need pay for your foreign exchange.
Their foreign exchange charges will be a composite of three elements:
- SPREAD – The spread is the difference between the rate at which they buy currency from you and the rate at which they sell currency to you.
- COMMISSION – The charge they make for providing their foreign exchange service to you.
- TRANSFER CHARGE – The charge they levy for moving the funds to where you want them to go.
The total of these charges will typically add around 4% to your foreign exchange costs.
Over the life of a 20 year €200,000 Euro mortgage these unnecessary charges could cost you around €11,433.60.
Read our page on Foreign Exchange for more information on how to calculate how much you could save.
Foreign Exchange Planning
The good news is, there is another way – Foreign Exchange Planning.
This is how foreign exchange planning works.
Using a solid and secure FSA regulated foreign exchange broker, you enter into an arrangement to transfer a regular variable local currency sum into a fixed specified sum in a foreign currency.
The transfer should match your regular payment and receipt profile plus a small additional safety margin. The sum will be automatically debited from your nominated account and the converted currency will be deposited directly into your nominated receiving account.
You get three significant benefits from foreign exchange planning:
- Because the agreement is not transaction by transaction, you can get a better foreign exchange rate from your foreign exchange broker.
- You gain from the phenomena of pound cost averaging. This will have the effect of smoothing the fluctuations of the cross currency foreign exchange rates.
- You trade at lower cost because a reputable foreign exchange broker will have:
- A lower SPREAD
- Charge no COMMISSION
- Make no TRANSFER CHARGE
- Reliably execute the transaction on time and to the foreign exchange planning schedule you set up
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