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How Forex Fluent Are You? Take our Quiz

By Jeff Matheson, Managing Director, HiFX North America

Each year, an estimated 6 million households in the U.S. send billions of dollars to family, friends, and others abroad. Some are supporting children studying in another country, some are planning destination weddings or long-term vacations, and others are buying property -- a booming business of late. According to recent data, the growth of U.S. home buyer interest in Europe is up 180 percent over last year.

Whether you’re sending Swissies, calculating Kiwis or lending Loonies, if you’re one of these 6 million Americans, what is the best way to move money internationally and how can you find the best deal?

For most people regardless of whether they're based in the US or overseas, their bank or credit union is the first port of call assuming that it’s their best option. However, most banks offer poor exchange rates and charge a variety of additional fees.

Banks bank on the hunch that very few of their customers check the exchange rates and how much they’re paying. As a result they take advantage of a captive market and continue to cash in on customer lethargy.

It therefore pays to compare the fees and exchange rates offered by banks with those of an international money transfer specialist.

When making international wire transfers, the costs fall into two main areas: fees and the exchange rate. When shopping around and comparing your bank to a currency transfer specialist, make sure to look at both.

  • Fees. The charges you see.

A multitude of fees, charges or commission can apply, both for the sender and the recipient. Many providers levy lots of small charges to disguise exactly how much it costs.

  • Exchange rates. The charges you don’t see.

Many banks and credit unions claim to offer commission-free transfers then simply provide poor exchange rates instead. As a result it’s often difficult to compare one provider with another as some publish charges and others don’t.

But this minefield of complications actually boils down to a very simple question…

How much foreign currency will I get for my money, after all the charges have been applied?

Exchange rates often change by the minute, so to compare one option to another, experts advise comparing exchange rates in quick succession and jumping on the best offer provided. An international money transfer specialist can help here.

For years the idea of retaining such a specialist was considered both exotic and only for the uber-wealthy, but companies like HiFX and others are democratizing overseas money exchange, making it easy, quick and affordable. The concierge-like service is also a lure to anyone feeling less love from their banks these days.

When deciding which provider to use, it’s important to ask the following:

  • How long has the company been in business?
  • Are they licensed as a Money Transmitter Business and do they follow all rules and guidance of FinCEN and the Office of Foreign Assets Control(OFAC), including the Bank Security Act (BSA) and USA Patriot Act 2001?
  • What do their customers have to say about the service they provide? Independent review sites such as Trustpilot are a great source of customer reviews.
  • How strong is the company’s balance sheet?
  • Do they have professional indemnity insurance protecting customers from staff fraud, etc?

To help navigate the world of foreign exchange we’ve prepared a quiz covering today’s must-know financial terms to test your currency IQ.

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How Forex Fluent Are You? Match the term on the left with the correct definition on the right!

Match A Match B Note : * Please enter only numbers 1 to 15 in textbox. Email 1. Ask

An international system of identifying bank accounts across national borders to facilitate the communication and processing of cross border transactions with a reduced risk of transcription errors.

2. Bid

The account and bank details of the beneficiary. For example, for EUR beneficiaries, this would include the SWIFT and IBAN.

3. Base currency

Effectively a 'buy now, pay later' scenario, allowing you to lock in a rate for a future transfer. This tool allows you to purchase/sell your currency now, at the prevailing rate, with settlement for a transaction set to be delivered on a pre-determined date in the future.

4. Major Currency Pairs

Used by the banks to trade currency between themselves in large amounts. You'll usually see it quoted on online currency converters and is often used for indicative purposes. This is not appropriate for consumer and corporate clients.

5. IBAN

The price for buying a foreign currency

6. Market Order

The receiver of the funds.

7. Beneficiary/Recipient

This targets a specific rate of exchange. The markets are then monitored and should the market reach a customer's predetermined exchange rate, the currency is bought or sold automatically. It can be amended or cancelled at any time prior to the transaction taking place.

8. Beneficiary wiring instructions

The first currency quoted in a pair. For example, for EUR/USD, the base currency is EUR.

9. Value date

Closely connected to the commodities market. AUD/USD, NZD/USD, USD/CAD

10. Midmarket rate

The unique identification of a particular Bank. It consists of 8 or 11 characters and can be found on account statements, invoices and documents showing bank account details.

11. Forward contract

A purchase or sale of one currency for another, for immediate delivery (usually 1-4 working days).

12. Commodity Currency Pairs

When a transaction settles and the money is released to the beneficiary

13. Spot transaction

The price for selling a foreign currency

14. Interbank rate

EUR/USD, GBP/USD, USD/JPY, USD/CHF

15. BIC/SWIFT Code

It's the mid-point between the bid and offer rates.

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