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Smart ways to save serious money in currency exchange transactions

By July 31, 2017Newswire

I don’t like banks. At the best of times they’re bureaucratic, inflexible and have no interest in helping me, the customer.  But during the holiday season I like them less.  Mostly, because I hate paying outrageous charges when I’m using my credit cards abroad, or transferring money globally.

If you travel a lot, for business, to see family overseas and during the holidays, you’re probably aware of all the costs involved in spending abroad.  Or maybe you’re not.  After all, it’s a minefield of hidden and confusing charges.


Spending Abroad

As an expat living in Switzerland, did you know that most banks here charge you  around 1.75% handling fee when you spend money overseas?  This is in addition to the extra 1+% per transaction on top of the current exchange rate when you convert your money.

I had a holiday in Croatia last month – here’s my bank charges for a hotel booking:


ubs exchange rate charges


The actual exchange rate on that date (14th July) for Croatian HRK into Swiss CHF was 0.14956:

HRK to CHF exchange rate

However, UBS used 0.1548 rate (see on my statement above).  Which is a hike of +3%, in addition I was charged 1.75% processing fee on the transaction.

Try adding this up over the umpteen overseas business and holiday trips you do a year, and you can see why I was impressed when I heard about a startup who let you spend overseas without any fees and using the real exchange rate.

The Fintech revolution is spawning new alternatives to the traditional banks and their established practices.  And I find disruptive alternatives that are easy to use and save me money, refreshing and compelling.

Banks have had a monopoly imposing excessive charges on their clients for doing business abroad for a long time. But this new competition is starting to drive down costs and improve the value and service that we expect.

I’ve had my eye on one company at the forefront of this change for a while now, it’s called Revolut.

Revolut is a smartphone app linked to a pre-paid Mastercard.  It offers interbank rates on currency (which is the rate in which the banks lend to each other – and far better than bureaux de change) and there are no fees whatsoever.

I’m not easily impressed by new technology, but I believe Revolut have launched a seriously smart and revolutionary alternative to established banking services.  I’m all up for challenging the status quo and giving the banks something to think about.

When using your UBS credit card abroad you will be charged around 1% from the current spot level to the exchange rate you convert your money at, plus a 1.75% handling fee.

Using my Revolut card I get the real exchange rate and no handling fee, saving me up to 2.75% per transaction.  Here’s another hotel booking which I made recently with my Revolut card – see no fee and the spot exchange rate used:

revolut app

I’ve been using mine for a couple of weeks and am hooked, but if you want to do your own due diligence check out this by Reuters  or the run down by Money Saving Expert.

From a business perspective I expect to see more developments from Revolut.  They just raised $66 million in a fund-raising round which dwarfs the 19.5 million pounds ($25 million) raised by London-based rival Monzo earlier this year.  Launched in July 2015, Revolut now has over 730,000 customers, and is so far, distinctive in offering interbank exchange rates, no-fee international money transfers, and in allowing customers to hold and exchange up to 16 different currencies in their app-based accounts.

The founder Storonsky, wants to shake up the banking industry (he also hates banks) “They’re so bureaucratic, with so many managers not really doing anything…”  and has already announced they are adding Bitcoin to the app in response to high customer demand.

So how does Revolut make money? They get a cut of the Mastercard fee every time you pay for something, and from users who change more than 5,000 Euros per month (0.5%).


Transferring money globally

As a expat in Switzerland I often find myself needing to make money transfers  across the world.  And my clients at Fern Wealth are regularly sending payments from Switzerland to the UK or Europe for monthly mortgages, to family or to pay bills back at home.

But did you know that this too is an area where the big banks will happily rack up the charges making this a painful experience for you.

You could use your Revolut account.  It allows you to transfer up to 5,000 Euros/ GBPs globally with no fee.  You can transfer 23 currencies to any bank, business or friend with the real exchange rate – saving you up to 6%.

But what if you want to move a more significant lump sum for investing purposes?  Perhaps like our clients, you want to move your Swiss Francs into Euros as the Franc continues to weaken over time.

Or maybe you need to move currency for personal reasons.  Last year I wanted to move 20,000 GBP from the UK into Swiss Francs.  If I had made the transfer with UBS here’s what it would have looked like:

Sold:                       21,191.09 (GBP)

Bought:                  29,000.00 (CHF)

Date:                       6 May 2016

Exchange Rate:    1.3685 (1.75% from mid market rate)

However, here’s how it actually looked using an independent foreign exchange broker:

foreign exchange transaction


                                                        UBS                                                               Circadian FX (actuals above)

Sold:                       21,191.09 (GBP)                                          20,902.41 (GBP)

Bought:                  29,000.00 (CHF)                                       29,000.00 (CHF)

Exchange Rate:    1.3685                                                           1.3874


You can see I saved £289.00 by doing this transfer with our preferred independent foreign exchange broker Circadian FX Solutions, rather than through UBS.

The key factor is not the headline charges, fees and commissions that make up the largest potential savings. The biggest savings are made by dealing with a specialist company that will give you the best rate that is as close as possible to the institutional interbank rate.

So whether you’re a busy business traveller or a serious expat investor, being savvy about your currency exchange transactions is easier than it’s ever been.  The banks are being challenged on all areas of currency exchange and with new technology it’s quick to set up and slick to use.  There is no excuse for staying with the big banks – unless you’re happy to give them a juicy cut of your money.


By Steven Flintham – Founder and Director of Fern Wealth


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