Using a dedicated money transfer service instead of a bank generally means you get a better exchange rate.
If you use dedicated international money transfer services, it’s likely that you’re already getting the best possible exchange range. If you’re still using your bank to transfer funds then you may be getting ripped off. The value you receive from a money transfer mostly depends on the exchange rates and fees and with so many options available, exchange rates can vary greatly.
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How do I get the best exchange rate?
It’s quite easy to find the best exchange rates, however you must also make sure the fees for your transfer are competitive, otherwise you’ll lose money this way.
Getting the best rate when transferring money
Here are some tips to ensure you get the best deal on fees and exchange rates when transferring money:
- Find out what the current rates are. You should have a reliable baseline to compare the rates offered by money transfer companies and banks. Two reputable currency conversion resources include XE and Oanda. These are free tools you can use to see live conversion rates and both sites feature currency conversion calculators.
- Compare by asking for a quote. Getting the best exchange rate can be difficult because money transfer services can charge high fees but offer competitive rates. Ask for a quote so that you have all information and then compare quotes from other providers.
- Compare the most accurate rates. Until you register with a money transfer service, you’re more than likely seeing their indicative exchange rates and not the most accurate rates available. Make sure that you compare the exchange rate you’ll actually receive, which will usually require you to register with a service or make a call. If you ask for a quote, you’ll receive accurate rates and information.
- Utilize forward contracts. A forward contract allows you to lock in an exchange rate for a transfer that will take place in the future. In most cases you can lock in a rate for up to 12 months in advance, saving you from receiving a poor rate when you make a money transfer in the future. Not all transfer companies will allow you to use a forward contract, so ensure you consider this when comparing. Forward contracts can sometimes only be offered on larger transfer amounts, but this depends on the transfer service.
- Consider a market order. A market order, also known as a limit order, allows you to choose a favourable rate, and then instructs your money transfer company to buy or sell your chosen currencies once that rate is available. Much like a forward contract, only some money transfer companies will offer these and it may only be for larger transfer amounts.
- Consider a multi-currency bank account. If you regularly deal in currencies, for an international business or for personal reasons, a multi-currency bank account can be a good idea. Also known as foreign currency accounts, they allow you to hold different currencies and convert them into CAD when you want. This means you can avoid short-term rate fluctuations from harming your balance. HSBC offer this for several different currencies, while many other Canadian banks offer US accounts only.
- Carry out one large transfer rather than several smaller transfers. If you want to send a large amount of money, try to send it all at once rather than in smaller separate transfers. Many transfer companies can offer better rates and lower fees for large transfers.
Getting the best rate when travelling overseas
If you’re travelling overseas and looking for tips on receiving the best exchange rate, here are some things to consider:
- Avoid busy areas and airports. Unless you’re organizing a currency pick-up, which companies like Travelex offer, airports and touristic city centres can provide poor exchange rates.
- Exchange in the country you are travelling to. While you may want to exchange a small amount before you leave your home country to ensure you have money to get you from the airport to your hotel, exchange the majority of your currency on arrival. Once you touch down, avoid the airport and tourist destinations when looking for a currency exchange provider.
- Consider an international debit, credit or travel card. Some of these cards are offered by major banks and come with 24/7 support. Exchange rates offered by Visa and Mastercard can often be competitive. Read more about these options below.
- Avoid exchanging at a restaurant or hotel. These locations can offer convenient, on-the-go currency conversion but unfortunately might not offer the most competitive rate.
- Avoid purchasing in your own currency. Some retailers will offer you the option to pay in your home currency and will then convert the funds themselves. This can be difficult if you don’t have a currency calculator on hand and you may end up losing money on the exchange.
Definition: exchange rate
An exchange rate is a way of showing the value of one currency compared to another. Exchange rates are impacted by the supply and demand of a currency, a country’s inflation, trade between countries and other factors, so rates can fluctuate throughout the day. Indirectly, exchange rates dictate the costs of many day-to-day items you buy which are purchased from overseas or made using materials which come from foreign countries. Directly, you will come across exchange rates when travelling overseas, purchasing goods from overseas, or sending funds overseas. This guide will explain how to get the best exchange rate available when sending money overseas.
Where can I exchange money?
The answer to this question depends on the reason for your exchange. If you want to convert money to send it overseas, a few of these providers will not be the best option for you.
- Money transfer companies. These are specialist currency exchange and money transfer companies which generally offer competitive exchange rates and low fees. Many of them also offer a large range of services such as forward contracts and market orders.
- Walk in kiosks and banks. These are brick-and-mortar currency exchange and money transfer destinations like banks and kiosks used by many Canadians. Some of them like Western Union and MoneyGram can offer competitive deals for sending money overseas or converting money, depending on the service.
- Credit cards, debit cards and travel cards. Apart from travel money cards, these will exchange your funds from CAD to the currency of your choice instantly using the applicable exchange rate. Some cards use the Visa or Mastercard rate, which can be competitive, but if you pay a transaction fee or ATM withdrawal fee for the transaction it may become expensive. Travel cards allow you to transfer funds onto your card at the exchange rate set by the card provider and ultimately avoid exchange rate fluctuations.
Comparing exchange rates
Below is a comparison of the advertised rates for three different money transfer companies and one bank. When making a comparison, be sure to get an accurate quote from the provider rather than using the advertised rates since the two may be different.
|$1 CAD to USD||0.7488||0.7887||0.7619||0.7888|
|$1 CAD to EUR||0.6397||0.6706||0.6513||0.6706|
|Fees for $1000 transfer||$13.50+|
The best rate in this comparison table is offered by TransferWise, where they also charge the lowest fees, but only if you transfer using a bank account. While banks typically offer the worst exchange rates, depending on the bank their fees may actually be lower than those charged by MoneyGram.
This comparison doesn’t take transfer speed into account or transfer methods, for example sending money to be picked up in cash by your recipient.