How do I get the best foreign exchange rate?
For businesses, getting a good foreign exchange rate can make a huge difference in your bottom line.
But how do you get the best exchange rate?
The issue is that there’s no one set global FX rate. Prices change all the time, and different suppliers have different rates. Even small variations can have a big difference in how much money you keep in your pocket or receive.
Here’s how we recommend you go about getting the best FX rate.
Foreign exchange provider research is key
It might take some time, but it all starts with shopping around to find which provider has the best exchange rate.
But be careful when looking into foreign exchange services, or what the banks are offering, as these suppliers won’t typically offer the real exchange rate. The rate you see has an added mark-up on the real exchange rate to make the transaction more profitable for them, so they can keep more of your money in their coffers.
Do your due diligence
Forewarned is forearmed, and doing your own research means you know what to expect as an acceptable foreign exchange rate. This doesn’t have to take up much time, either.
Before you start looking around at different foreign exchange options, do a quick internet search to find the current mid-market exchange rate. This is a pretty good indication of what the banks are charging each other, which you can then compare against any offered FX rate and see if you’re getting a fair deal.
Don’t get confused
Smaller businesses and first-time users may get confused by the different rates available when you’re looking to exchange currency.
There are different terms for different exchange rates—such as the spot rate, money rate, or forex rate—and a particular rate on one of these doesn’t necessarily translate into the exchange rate you’re receiving.
The rate to pay attention to is the interbank exchange rate. Also known as the mid-market rate, this is the globally accepted exchange rate, at that moment, which is used by banks when they exchange currency.
Look at the total cost
The exchange rate is just one piece of the puzzle when trying to find the best FX rate.
While the supplier may advertise low rates, other fees can come into it which make their seemingly competitive exchange rate cost you more in the long run. Things like commissions, foreign exchange fees, and card fees may not be advertised as part of the total cost.
Some things to be aware of are:
Commission prices. Be sure to ask around to see what commissions are being charged
Zero fees or commissions. This usually means they’ve marked up the real exchange rate considerably to make up for it
Beware the banks
We said this before, but it’s such an important point that it deserves its own section, just to reiterate.
Banks will usually have the highest foreign exchange rates when compared to other providers. This is because banks are, typically, trustworthy. People use them because they’re a known and respected institution, and we’re likely to just wear higher exchange rates as part of their service.
But it doesn’t have to be this way. For example, check out the difference in foreign exchange rates between Airwallex and the Big 4 banks.
For some businesses, instead of going through the process of exchanging foreign currency, you can simply order online. Ordering online allows you more chance to purchase and pay via card, or in your suppliers’ currency. This allows you to reduce any extra fees, leaving you only out of pocket for the foreign exchange fee charged by your card’s supplier.
Pay in the local currency
Better than paying online, simply pay your supplier in their local currency. This way you avoid the need to exchange currency and avoid any foreign exchange fees. An Airwallex Foreign Currency Account allows you to send, receive, and hold money in specific currencies, with no exchange necessary—avoiding the banks altogether.
Lock in rates when they’re favourable
While FX rates change minute by minute, some suppliers allow you to lock in FX rates when they’re favourable.
With Airwallex, you can lock in a current FX rate for a set period of time, giving you certainty around your transactions. This allows you to minimise FX rate risk, and get better value for your money, for longer. It’s a great option for businesses that move large amounts of stock over an extended period of time.
Airwallex gets you the best exchange rate, every time
Airwallex takes the headache out of FX rate shopping. We offer you the best exchange rate available because we’ve built our own foreign exchange engine to always make sure we’re always exchanging at the best possible rates.
With Airwallex you get direct access to our interbank exchange rates, regardless of the volume or size or your order. In fact, our financial infrastructure is built so we can offer your business the best FX rate possible, and keep more of your money in your own pocket.
An Airwallex Business Account allows you to convert and hold a huge range of foreign currency with no monthly fees, no card fees, and only a small margin on top of the interbank FX rate.
So get in touch with us today to organise a demo, and see how you can get the best foreign exchange rate for your business.
Related article: The easiest way to calculate an FX rate
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