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Operating Globally? Invoicing In A Foreign Currency Explained

It is difficult to provide definitive information on currency exchange fees and margins as these will vary between the various foreign exchange brokers, however the majority of foreign exchange brokers will typically remain within the following thresholds.

Fees:

    • Transfers greater than £3,000 – Fee Free
    • Transfers less than £3,000 – Currency Exchange Fees typically range from £5 – £15 per transfer
    • Certain providers may promote  that they do not charge a currency exchange fee which could be due to:
      • The minimum transfer amount they accept is £3,000 – £5,000
      • They incorporate fees in to their margins, thereby offering a worse exchange rate

Margins:

Foreign exchange brokers and banks make money on the margins they take from each transfer they process regardless of whether it is a Spot deal, Forward exchange contract, Limit order or Regular international payment.

A margin is the difference between the exchange rate the foreign exchange broker can buy at and the exchange rate they offer to their clients.  Each foreign exchange broker and high street bank has the flexibility to charge any margin they wish, which typically varies between 0.2% and 4% depending on the company and the size of the transaction.

High street banks typically charge a margin of between 2% – 4% and will usually charge a fee of between £20 – £40 for each international money transfer depending on the transaction size.

Foreign exchange brokers typically charge a margin of between 0.2% and 1.2% depending on transaction size, and may or may not charge a fee (see the section on Fees for more information).  Foreign exchange providers are generally more open to negotiating on exchange rates and fees to ensure they win the clients business.  However beware a foreign exchange broker offering exchange rates close to the interbank price, as firstly you have to question why they are willing to process a transaction which will not make them any profit, and secondly if you have the potential to be a repeat customer the foreign exchange broker may start widening their margins in the future to ensure they make a profit overall.

Terminology:

Interbank rate – the rate at which international banks trade between each other.  When looking at currency converters on any website, the exchange rate will typically be interbank or mid-market rates.  It is important to understand that a consumer will not be able to trade at interbank rates so exchange rates on currency converters and similar websites should be for information purposes only.

Wholesale rate – the exchange rate foreign exchange brokers can obtain from their banks or counterparties, the more the foreign exchange broker trades the better wholesale exchange rate they will receive or the tighter the margin they will be offered by their counterparty.

Customer rate – the exchange rate an foreign exchange broker will offer to their clients.  The closer the exchange rate is to the interbank rate, the tighter the margin, the better the exchange rate, the more monetary value the client will receive.

Margin – the difference between the wholesale rate and the customer rate.  The margin is the foreign exchange broker’s gross profit on the transaction.

We cover foreign exchange, currency and cryptocurrency news and guides. Our readers can find currency-specific foreign exchange news, political updates affecting currency and insight into where foreign exchange trends may go, as well as the latest cryptocurrency analyses and trends.
Foreign Exchange Live

Foreign Exchange Live

We cover foreign exchange, currency and cryptocurrency news and guides. Our readers can find currency-specific foreign exchange news, political updates affecting currency and insight into where foreign exchange trends may go, as well as the latest cryptocurrency analyses and trends.