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How do you get the best possible retail foreign exchange rate?

3 minutes reading time

Some individuals are regularly exposed to foreign exchange risk, particularly cross-border workers who receive their salary in one currency and pay their basic living expenses (rent, bills, etc.) in another.

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If this situation describes you, you are probably wondering how to get the best foreign exchange rate from your financial intermediary to improve your bottom line. You will find the answer in this article!

Find out how to get the best possible foreign exchange rate, maximize your currency transfers and avoid the pitfalls of the foreign exchange market.

What is the current foreign exchange rate?

If you want the best possible retail foreign exchange rate, the first thing to determine is the benchmark foreign exchange rate for the currencies in which you are interested. In other words, you need to know the actual, up-to-date foreign exchange rate.

To do this, you need to know the interbank rate, also known as the “middle market rate.” As the name implies, it is the exchange rate at which banks lend money to one another. Therefore, the interbank rate is dependent on the law of supply and demand.

You can monitor permanent fluctuations in the interbank rate in real-time on large financial data sites (such as TradingView and Investing, for example) to determine the current foreign exchange rate quickly.
With this information, you can calculate the margin your financial intermediary charges and determine whether they offer an attractive foreign exchange rate.

Where do you go to get the best foreign exchange rate?

Once you have the interbank rates of the currencies you are targeting, you can compare the different offers available

Several types of financial intermediaries are likely to offer foreign exchange services, including:

A financial intermediary is an Over-The-Counter (OTC) market player and as such sets its own margin in order to derive compensation from your foreign exchange transaction.

Consequently, margins may vary greatly depending on the financial intermediary chosen, the amounts to be converted, and the currencies involved. Margins can be under 1% for the most common currencies and up to 5% for the most exotic ones!

Currently, specialized online services offer the lowest margins (in contrast, traditional banks offer the highest). You need to comparison shop and solicit quotes from several financial intermediaries.

Are you looking for the best Swiss Franc / Euro foreign exchange rate?

Noteworthy: The margin and the final rate are obviously not the only points to examine in your quest for the best foreign exchange rate. The overall quality of the services offered by your financial intermediary is also important, particularly the speed of execution and the possibility of locking in a guaranteed foreign exchange rate.

How do I know if the foreign exchange rate is favourable?

While the new foreign exchange players do indeed offer the most attractive margins, not all of them are equally transparent about their offerings. There can be hidden fees, tempting sales tactics, and so on. To get the best foreign exchange rate, you must also know how to identify the pitfalls of the market.

Avoiding hidden fees

Focus on the most transparent players to ensure you get the best rate. This is undoubtedly the best course of action. Indeed, many foreign exchange players present rather opaque offers, which contain hidden fees that can significantly increase the cost of your transaction.

Traditional banks, in particular, often take advantage of their dominant position and the trust it naturally engenders to increase their spreads as much as possible, and they might even charge a “processing fee” on each transaction. So be especially careful about the total cost of your foreign exchange transactions!

Beware of enticing sales tactics 

Another trap to avoid if you want to get the best possible foreign exchange rate is the promotional offer. Used by many financial intermediaries in the foreign exchange market, these offers allow you to benefit from what initially is an exceptionally attractive rate. However, the attractive rate is, in reality, only valid for your first foreign exchange transaction.

Indeed, the promotional offer applies to initial transactions but generally not to subsequent transactions. After the promotion ends, the rates charged by the financial intermediary increase. It is a sales tactic designed to attract customers.

Should you try to beat the market to get the best foreign exchange rate?

In your quest to find the most attractive rate, you may well be tempted to speculate in the foreign exchange market.  

Indeed, since currency prices constantly fluctuate in the foreign exchange market, it is possible to obtain more or less attractive rates, depending on market conditions. 

These vary depending on several factors, such as: 

  • economic conditions;
  • central bank monetary policy;
  • time of year;
  • investor behaviour.

You might think that with a bit of knowledge and by monitoring the market, you could probably take advantage of these fluctuations and save a substantial amount. But this is not the case. Speculation in the currency market is especially risky.

Between the vagaries of the market, competition from professional investors, and the high risk of financial loss inherent in speculative activity, trying to beat the foreign exchange market to make the most of your trading is definitely a bad idea.

Financial professionals certainly endeavour to predict foreign exchange rates, but these forecasts should always be taken with great caution.

Offered by many banks, forward selling may seem attractive at first glance. It allows you to lock in a foreign exchange rate in advance for future foreign exchange transactions over a predetermined period, which usually extends over several months. This way, no matter how much prices fluctuate during this period, you know what your budget is in advance.

However, security comes at a high cost because you usually have to pay an application fee and face higher margins from your financial intermediary. 

Therefore, in most cases, you will not get a better rate than if you were to conduct your foreign exchange transactions in cash, meaning pay as you go. Not to mention that a forward contract significantly reduces your flexibility if ever you were to experience an unforeseen financial issue.

Finally, you may be influenced by the larger financial intermediaries’ marketing techniques and tempted to use more complex financial products, such as currency swaps or futures contracts. 

However, in addition to being significantly more challenging to follow daily, these products can lead you to speculate on Forex unintentionally, and therefore present pretty significant risks.

In conclusion, to get the best possible retail foreign exchange rate, the most advisable course of action is to determine the benchmark foreign exchange rate of the currencies you use in advance. 

Once you have this rate, reach out to online foreign exchange specialists (who offer the lowest margins) and comparison shop to identify the best offers. Always remain leery about sales pitches that are too good to be true. 

If you live on the French-Swiss borderer, do not hesitate to ask about the five mistakes to avoid when exchanging your Swiss francs for euros


What are the different types of foreign exchange rates?

The two main types of foreign exchange rates are the “spot” rate, which is the foreign exchange rate for quickly converting (one to two days), and the “forward” rate, which is the foreign exchange rate for converting at a future date.

What is a reasonable foreign exchange rate?

To determine if a foreign exchange rate is attractive or not, compare it to the benchmark rate or “interbank rate” to ascertain whether the margin your financial intermediary is charging is high or not. The interbank rate is what banks charge one another. It is available on websites that publish financial data, such as Reuters.

How do you avoid paying foreign exchange fees?

Unfortunately, it is impossible to avoid paying foreign exchange fees entirely on foreign currency transactions. However, you can greatly reduce the fees by using online foreign exchange specialists whose margins are much lower than the traditional banks.

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