Is your bank giving you the best foreign exchange deal?
Is your bank giving you the most value for money when it comes to foreign exchange? In the import/export industry, the bottom line is that foreign exchange rates affect your bottom line. If your commercial bank is still your first port of call for international money transfers, it’s important to ask yourself, “Can I get better rates or better service elsewhere?”
In general, banks are exceptionally large, established organisations with high running costs. They employ thousands of people, have large buildings to maintain, and spend millions of Rands on marketing. As a result, banks often pass these costs on to the end customer through higher transaction, service, and admin fees. Additionally, most banks only offer competitive exchange rates to their biggest clients.
If you would like to maximise your import/export profits, and enjoy simpler international money transfers, it is best to explore your options.
What banks don’t tell customers upfront
Often, traders believe that it is simpler and more cost efficient to manage all their money affairs through one institution. After all, if they do all their other business and personal banking through one bank, why use a different provider for international money transfers?
What most people don’t realise is that using banks for international money transfers can quickly result in additional business costs, which cut into profit margins. Here are three things to be aware of when using a bank for international money transfers:
1. Banks often quote higher foreign exchange rates
The interbank rate is the rate at which banks and brokers buy and sell money to each other. A mark-up is added and an exchange rate is passed on to the end user. Banks get away with adding a higher mark-up to the exchange rate. Banks calculate and quote clients by taking the following into account:
- The amount of money being transferred (the lower the amount, the higher the exchange rate);
- The type of currency being bought and sold (and the volatility of those currencies); and
- The exchange rate levels at time of purchase.
Banks also frequently market their services as “commission free”, but then proceed to inflate the exchange rate.
2. Banks can charge high service fees
In addition to higher exchange rates, banks can also levy numerous fees on each money transfer. Some common charges include:
- Transfer charges;
- Overseas bank receiving fees; and
- Service or admin fees.
3. Bank fees don’t factor in hidden costs
Banks simply provide the money transfer facilities; they don’t do the legwork on behalf of customers. Standing in bank queues, making phone calls (and holding on), spending time obtaining and filling out paperwork are time consuming tasks – time that could be better spent on business matters. Other additional costs often also include paying accountants for tax clearances and advice.
What is the alternative?
You can make use of an independent foreign exchange broker. They offer international money transfer services without the pitfalls of going directly to the bank.
Some benefits of well-established brokers include:
- Better exchange rates. Brokers harness the power of bulk buying (i.e. they trade a large amount of money), which means they are able to obtain better exchange rates from banks which they can pass onto their clients.
- Lower service fees. Many brokers will charge fixed transaction fees, regardless of the monetary value being transferred.
- Less legwork. Brokers often handle all the paperwork on behalf of clients, which allows clients to take care of their business and avoid hidden costs. They also often offer telephonic or in-office support.
At Import Export License, we’ve teamed up with a number of foreign exchange brokers. These brokers provide our network of clients with convenient, professional foreign exchange services at competitive rates. Here’s how our brokers benefit our clients:
- Exchange rate savings. Our clients save between 0.5%-2% on each transaction’s exchange rates.
- Additional savings. Our clients save even more by enjoying lower service fees.
- Expert advice. Our clients have access to expert advice on foreign exchange related matters straight from our experienced foreign exchange brokers.
- Accessibility. Our clients can email their trades to their broker for immediate assistance.
- Safety and security. Our brokers are fully SARS- and Reserve Bank-compliant.
At the end of the day, when it comes to international money transfer, the question to ask is “How can I maximise my profit whilst streamlining the process?”. Cutting down on foreign exchange and transfer costs is a sure-fire way to increase your profit margins.
If you would like to see how working with a broker compares to using your bank, why not sign-up today? There are no monthly fees, and your account will be ready when you need it. To start the process, simply email your FICA documents or enquiry to firstname.lastname@example.org
Have any questions?
If you have additional questions about international money transfer, exchange rates, or general import and export related issues, fill in this form or contact one of our friendly consultants on 087 550 1038.
About the author
Tracy studied at Stellenbosch University and gained her initial experience in imports and exports through working for industry. After starting her own import business, and helping some friends do the same, she realised there was a need for reliable customs registration services. As a result, in 2011, Import Export License was born. Since then thousands of importers and exporters have been helped to obtain their import export licences, permits, specialised customs registrations and connect with Import Export License consultants for advice on importing, exporting, and other customs related matters.