The first thing we should say is that when it comes to someone's money, no amount is a small amount.
Consumers hunt around to save and get the best deal on insurance, utilities and bank accounts; the savings you can get on an exchange of currency should be viewed in exactly the same way and the company that overlooks the needs of someone converting what they (the company or the customer) consider a 'small amount' is limiting customer choice, pigeon holing the consumer and deviating from the very reason why challenger companies came in to being in this sector.
We will look at the costs of sending a payment, the ways you can send a payment, the reasons you might send a payment and how you can approach all of the above in pursuit of the best value for money
1. How much should it cost to send and receive your money?
It always costs something to send a payment.
You may have noticed your bank charges anywhere between £3 and £35.
Your bank may offer you a couple of different ways to send a payment too.
You can call them and ask for a CHAPS payments which, provided you request it before 14:00 should arrive at it's destination the same day.
Most 'online' domestic payments can be sent by FPS (Faster payment system). The cost for this is usually covered in the account fee you pay monthly. Faster payments incur no up front cost, but that doesn't mean they are free.
An international transfer can cost more.
This is because international payments cannot be sent using the FPS network. FPS only
exists within the UK domestic banking network. Other countries may have similar domestic settlement formats, but these tend not to extend to international payments.
Currency companies will also charge you for sending a payment. They do this because they rely on the UK banking system to send and receive money.
Therefore, the currency company does incur a cost.
This cost can vary depending on the format in which the currency company sends your payment and also depending on the amount of payments the currency company makes collectively.
If the currency company makes a lot of payments then they can usually get a discount on that cost from their bank.
However, the currency company does not necessarily pass on the saving to you.
So, if currency companies suggest they do not charge you for sending payments, this can mean a couple of different things.
Some companies use the domestic banking networks of the country you're sending the payment to in order to avoid any international payment costs.
This is very clever, but it does rely on that company having a presence in the country you're sending funds to and it invariably means you cannot send one currency to a country that does not deal in that currency as it's domestic tender.
Hence, you would not be able to use these sorts of companies to send euros to the United States.
You can only send those euros to a country whose domestic tender is euros because that is the only way these companies can ensure there is no domestic transfer costs arise.
They basically transmit your euros domestically from their euro located entity; they are not making an international payment at all.
Currency companies like Prime Cap rely on the relationship their bank has globally with banking institutions in the countries we are sending to.
If our bank is big enough then they will likely have a branch, license or presence in the country you are sending to, and we can make use of that network.
This enables us to keep costs to a minimum.
When you are sending to rare and wonderful countries with unusual or restricted currencies the costs climb.
At most we will charge £10 for an international payment, however, wherever possible we will pay for this cost ourselves from the margin we apply to the rate of exchange we offer you.
So, in theory, we are paying for the cost of the transfer for you. You have no upfront costs added to the amount you are exchanging or deducted from the amounts you are sending.
We prefer it this way because it means what you see is what you get and, in the case of smaller payments, where the difference in price can be fractional, we know that the only thing we have to get right is the rate and the additional service.
On smaller payments the cost of an international transmission can make up quite a sizeable chunk of the expenses you incur.
It seems a little ridiculous that you are charged £25 to send £250 to France, for instance.
In fact, it seems absurd that a business is charged to move euros to their own sterling account even though both are in the UK.
Some people would argue 'it does not cost your bank £25 to send the payment, so they shouldn't be charging you that',
Well, the unitary cost of sending a payment is never actually the underlying reason for this sort of charge.
If you buy a car you don't expect the dealer to sell it to you at the cost they paid for it, would you?
That would mean they make no money.
The bank is doing the same.
They are marking up the cost of using their international payment service and, frankly, why shouldn't they?
You do have other options that are less expensive.
The problem is that many people do not feel comfortable using the other options, like Prime Cap, but, this is not your bank's fault. They are charging you what they consider to be a fair price for the service they provide.
If you do not agree then you at least have to concede that they are not prohibiting you from voting with your feet and using other providers.
Unless they are...in which case you should report them.
Let's say you have a monthly payment to make.
Maybe you need to pay your insurance costs on a house abroad. Maybe you have a child studying overseas; or you live abroad and you have expenses in the UK.
One thing we advise is that, if you have the money in the bank and can pay for more than one payment upfront, do so.
The first thing this will achieve is that you will only be charged once for the international payment.
Secondly, the only FX risk you face (by that we mean the only risk you face of the rate being relatively good or relatively bad) is contained/limited to the one transaction you are conducting, rather than being an issue on each of the payments you make.
If you do not have all the cash in the bank to make a collective payment right now, then, you might find it interesting to look at extending the use of today's rate of exchange over a longer period.
Unfortunately this wouldn't necessarily reduce the cost per international transfer, because your cash flow might be such that you still make one a month, but, fixing the rate means you know what you have to pay each month and that doesn't change over the period of time you've locked it in for, and, if the rate drops you will be saving yourself more money by having fixed in a higher, better rate.
This is a very useful tool for when the pound is 'high'.
It basically allows you to extend your use of that high rate and protects you from having to pay more should the rate drop.
Our brokers will happily talk you through the particulars of this type of transaction. It is not a standard one and it is certainly not one your bank offers.
2. What are the different ways you can send a payment?
We often talk about how different banks and financial institutions send payments in different formats - as we did at the top of the post.
Sadly, you and I do not get to choose or decide which format gets used.
Therefore we have little control over the actual base 'unit cost' of sending a payment. We can't select a cheaper 'SEPA' format form a list.
Yes, institutions that make a large number of payments can hammer down the cost of each one with their payment facilitator, but, that rarely means an improvement for you at the front end.
So, we will consider this question as it relates to the physical, practical things you need to do or can choose to do in sending and receiving a payment.
You'd be forgiven for thinking that it is just the difference between sending a payment online, like with online banking, or calling up to confirm a rate. There are a number of other ways you can get money to someone or a business abroad, so, we will look in a bit more detail at these various ways and provide examples of how and when they might be used.
Yes, the first and increasingly common way is online.
This essentially means logging in to some sort of platform with a financial institution (whether that be your bank or someone like Prime Cap), inputting the particular amount you wish to send, clicking to confirm you're happy with the rate of exchange and then sending the money you want exchanged.
This way is often the cheapest and most autonomous way to get money from a to b, however, even in this instance there are differences in both cost and level of care.
For one thing, an online platform that you have easily 'registered' with without providing any more detail will often impose restrictions on how much you can transmit.
Should your activity exceed that limit over a certain period of time then you will be asked to provide more detail...because, based on the amount you are converting, the industry regulator insists your chosen company knows you better.
This can be a bit of a bore, especially if you didn't know or weren't aware that you might have to provide something more once you've exceeded the initial limit.
When it comes to things that require you to login, you will always have to electronically send the currency you want exchange to the provider exchanging it, by way of payment.
So, please don't think that just because it looks like an online banking system it can extract money for you to pay for your booking.
Your currency platform and your bank are separate and, for certain businesses, this is an important security feature.
If someone knows your currency platform login then they will still need to pay for any booking before they can receive anything. So, they will need to know all of your financial details rather than just one set.
What does it mean to deal 'by phone'?
Across the Prime Cap website you will see us reference the uses of 'dealing by phone'.
Our approach to booking a transaction is a blended one.
This means we enable our clients to use our cutting edge online platform, but we also provide direct access to our broking team over the telephone.
Depending on your preference we can handle everything from the locking in of a rate to the uploading of beneficiary information to the sending of a payment receipt to your intended beneficiary.
We can do all this, but, we find that many clients like to be involved in these aspects of a transaction and prefer the flexibility that the platform gives them when it comes to providing beneficiary information.
At the end of a day a blended approach is simply that. It uses the bits you find familiar, but makes room for the expertise we can offer to you over the phone.
We make the distinction between 'dealing by phone' and 'transacting online' simply because many of our competitors do just one or the other; plus, by emphasising our belief in the 'value add' of using the two we can be confident we've left nothing on the table and you have the best of both worlds.
How about a 'Cash Access' solution?
As you can imagine, we often get asked about travel money and converting hard currency so that you can use it in your own account rather than having it as notes.
Sadly we cannot take receipt of your foreign currency bank notes.
For one thing there are questions about how you came by them, but, we prefer to keep what we do as simple as possible.
Bank notes do not clear in to the financial system as easily as an electronic payment we might receive from someone paying us for an exchange.
However, we do appreciate that you may be interested in quick an efficient ways of paying expenses to trades people, contractors etc. abroad.
Providing your builder in France with a currency card, and loading that card with euros that the contractor can then withdraw from an ATM, means you get a cheap and competitive way of paying someone fast and, if the recipients preference is to be paid in cash, you can accommodate their preference with ease and without liability.
We have UK based design firms who pay third parties and free lancers abroad in much the same way.
Consider also the fact that free lancers in some countries might not have their own bank account or that the currency of that country is not mainstream and crediting an account is hard and drawn out.
By presenting your intended recipient with a globally recognised payment/currency card, they can withdraw funds in their own local tender. You're providing them with a safe and efficient mechanism for holding their earnings.
Sure, the need to use these kinds of mechanisms are not main stream per se, but we can and will advise you on their uses; likewise, if you think that something like PayPal is the only way you can be paid by customers overseas, think again and ask our team how we would approach foreign currency revenue collection.
3. How to get the best rate on a smaller payment:
When it comes to exchanging smaller amounts of money, getting the best rate really comes down to two things...
The first is how much it will cost the entity you're using for the conversion to actually perform the exchange.
The second consideration is to do with when you exchange your currency and how often.
So, someone sending a monthly payment will benefit from considering their approach to
this monthly cost in a different way to someone who just needs to make a one off payment.
As we have already said, it costs a currency business (and indeed a bank) to send a payment to someone.
Companies that send many payments may be charged less, but, will they pass on that saving to you?
In our case, Prime Cap will charge a flat fee for an international payment.
If we can afford to we will cover the cost of that expense ourselves, but, if we cannot cover it from the mark up we place on the currency we sell to you, we will simply itemise the payment cost of £10 when we quote for you.
For regular payments you may get better value and benefit from fixing the rate of exchange.
So, you can buy the total amount of currency you need all in one go.
This means you know what the GBP cost will be for an extended period - anywhere up to 18 months in fact.
The rate might not be better that what you could get for one payment today, but, should the rate of exchange change over the coming months then you may be saving yourself the difference in cost between where the rate is today, on the day on which you fixed, and the rate of exchange in a month should the rate in a month we worse.
Using an online platform invariably results in you receiving the same consistently competitive rate of exchange because it is easier for a firm to give you a set rate of competition than it is to negotiate that rate.
As an industry we would prefer as little time spent by an expensive currency dealer on your matter and an online platform represents an operationally efficient and cheaper way of achieving that lower cost.
So, our advice would be to select an online provider from the array of ones out there.
Prime Cap will always include access to an expert for you because that is what differentiates us. We would rather win a client because of our value add than have you wander off to another payment platform. You are the asset we would like to secure and, from securing your business, we can afford to lower our rates because of the scale we can achieve from working with a large number of people just like you.
You can then use our brokers to discuss timings, contract choice and what information might more the rate up or down in your favour, or not, between the time you engage us and the time you push the button to complete the exchange. This is all part of the service and we, unlike others, do not charge you any more for the use you make of our broking team.
How can an employee avoid charges all together?
If you're earning in a foreign currency and have a foreign currency account in to which that money is paid then you will incur a charge if you try and move that amount in to your preferred currency, even if it is in the same country and held with the same bank.
By providing details of our currency account to your employer you can avoid the fee for moving money to us or to your own domestic/preferred currency account.
A number of our private clients do this.
Their salary or expenses arrive with us directly. We then broker their conversion.
Alternatively you can login to do this, and, if you have same currency expenses as your salary, you can make payments out from this account directly to your supplier, landlord or utilities provider.
At Prime Cap our bottom line is that no amount of money deserves less than the most attentive consideration when it comes to sending it, receiving it, exchanging it or holding it.
Our door is open and we want to dispel this myth that it is only large scale transactions that we are interested in. It is a myth widely believed across the sector and one which devalues the need and undermines the confidence of customers who still require the service.
If you would like a discrete and no-obligation discussion with one of our brokers then do get in touch or drop us an email to see how we can assist you.