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Foreign Exchange Options?


Daniel Hersh
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Does anyone who's purchased a concertina where funds were required in a currency other than your own have any recommendations for the best way to handle this to minimize fees and get relatively favorable exchange rates? I'm particularly (but not necessarily) interested in experiences of buyers in the US. Has anyone used or considered using XE for this?

 

Daniel

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Does anyone who's purchased a concertina where funds were required in a currency other than your own have any recommendations for the best way to handle this to minimize fees and get relatively favorable exchange rates? I'm particularly (but not necessarily) interested in experiences of buyers in the US. Has anyone used or considered using XE for this?

 

Daniel

Daniel

 

I believe most credit cards offer it as a service. Especially for international travel. I've purchased in Sheckels, Pounds, and Canadian Dollars and paid at the end of the month. The exchange rate was more favourable than buying local currency at a local bank, but it fluctuates daily. I don't think there is a restriction on mail order. A long time ago I purchased a canvas "Tilley Hat" with Canadian Dollars from the manufacturer in Canada (mail order, and UPS shipping) before they opened a US outlet. Master Card, Visa, American Express are a few.

 

Thanks

Leo

Edited by Leo
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I have both bought and sold concertinas to/from the States. I've always used direct bank to bank transfer. There is a moderate charge of a few pounds and a reasonable exchange rate. It takes just a few days and is as safe as houses. When I sold a concertina to someone in California (there goes my safe as houses comparison) I asked him to use the service and he had no trouble - the only problem was with US customs, where the concertina sat for nearly a week before it was released to my buyer.

 

Chris

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I've used XETrade (www.xetrade.com) for international transactions to the UK and Australia, and have been satisfied with their service. I've found their service fees to be significantly less than those of the bank. They will let you do either a direct wire transfer or issue a bank draft to the recipient in the currency of your choice.

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I've used XETrade (www.xetrade.com) for international transactions to the UK and Australia, and have been satisfied with their service. I've found their service fees to be significantly less than those of the bank. They will let you do either a direct wire transfer or issue a bank draft to the recipient in the currency of your choice.

 

 

Cheapest way is to buy the currency in a travel agents (far more comtetitive than banks) and post cash in a recorded delivery signed for letter.

 

Clearly a higher degree of risk, but certainly the cheapest way and often quicker than the bank transfer/international money order route.

 

Dave P

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I've used www.xetrade.com and been pleased with the rates and service.

 

There is an application procedure which took a few days.

 

Bank wires take a couple of days to clear. The cost is about 50% less than what my personal bank charges.

 

Drafts take about two weeks to be delivered from time of placement. No charge for bank drafts.

 

I've found their exchange rates to be much better than the local banks.

 

Greg

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Paypal. No time to lose, payment is immediate. Some fees, whatever. We're talking about ocasional transaction, not business selling for millions of dollars each month, right?

Some fees, whatever? With the Paypal standard rate and conversion fee, even a $1500 payment from US to UK costs the UK seller nearly $100 extra. Buying a Jeffries for $7000 will be an added $450. These days, many sellers are conscious of this fact and will tack on that added cost if you pay by this method.

 

See http://www.ppcalc.com/

 

A wire transfer through XE will be significantly cheaper and usually only takes 3-4 days.

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Paypal. No time to lose, payment is immediate. Some fees, whatever. We're talking about ocasional transaction, not business selling for millions of dollars each month, right?
Some fees, whatever? With the Paypal standard rate and conversion fee, even a $1500 payment from US to UK costs the UK seller nearly $100 extra. Buying a Jeffries for $7000 will be an added $450. These days, many sellers are conscious of this fact and will tack on that added cost if you pay by this method.

 

See http://www.ppcalc.com/

 

A wire transfer through XE will be significantly cheaper and usually only takes 3-4 days.

Daniel, it's good to have everyone's suggestions, so that you have as many options as possible to investigate, but the details may vary, and your needs may also differ. Check out all the suggestions, and see how the details stack up for your particular transaction.

 

PayPal doesn't work for me, because I live in Denmark, and the Danish crown (Denmark joined the EU, but not the Euro) is not a standard PayPal currency. Even with dollar-denominated accounts in both Denmark and the US, they won't allow me to pay or receive in dollars, because of my Danish address. So I would get stuck with their conversion costs, which are higher than my bank's. (And if I were paying for something in Denmark, PayPal would insist on converting to one of their standard currencies, then converting back, sticking buyer and seller with double conversion charges, though the currency would be the same on both ends. :angry:)

 

Since you're in the US, that would not be a problem for you. But note that there are three ways that agents (PayPal, bank, XE, credit card, or whatever) make their profit:

... commissions: they charge a specified percent of the transaction

... fixed charges: they charge a fixed amount per transaction, almost always in addition to the commission or buy-sell spread

... buy-sell spread: the rate they use when selling a particular currency is different from the rate they use when buying (e.g., the dollar amount they charge for £100 is more than the dollar amount they'll pay you if you sell them £100); since this is a difference in rates, it works just like a commission (as if the "commission" in each direction was half the difference in rates)

 

Some services -- mainly storefronts that exchange cash for tourists, I think -- actually use all three kinds of charges explicitly. Most don't bother with explicit "commissions", since they can get the same effect with the buy-sell spread, and it's harder for the customer to figure out just what the percentage rate is. (Impossible, if they don't tell you both rates.) Fixed charges translate into higher percentage costs on smaller transactions than on larger ones.

 

Now a few comments about specific agents:

... PayPal: According to the PP Calc calculator dpmccabe mentioned, the fixed charge is 30 cents (not much), plus a 2.9% commission, plus a 2.5% currency conversion fee. Assuming those rates are correct and complete, then the PayPal fees on a $100 foreign purchase would be $5.70; on a $2000 purchase (we're talking concertinas, after all), they would be $104.30.

 

... major credit cards: Credit cards are very handy and sometimes give excellent exchange rates, though that's something you need to inquire about specifically. The problem is that most individuals can't accept credit card payments, and businesses generally have to pay commission-type fees on each purchase (or so I'm told), whether or not there's a currency conversion.

 

... your bank: Here's where things get tricky... and can vary a lot. I prefer to use electronic transfers, though I've also used bank checks, which in some cases can be much cheaper.

 

Most banks charge fixed fees for electronic transfers, in addition to their buy-sell spreads on currency conversions. And American banks seem to be both greedy and very variable. The buy-sell spreads from my Danish bank are about half what I've experienced with American banks. The fixed fees are also much less... about $10 per international transfer, as opposed to $30 for one American bank and $60 for another. (In both cases, fees are higher for "express" transactions.) So no matter which direction the money is flowing, I always have my Danish bank handle the conversion and the charges. You need to check with your own bank(s) for their details.

 

But there's an extra twist to be wary of: Many banks don't send their international transfers directly, but via other banks, and there's apparently an international agreement that these intermediaries can tack on their own charges, which they subtract from the amount being transferred. And unless you ask, your own bank won't -- possibly even can't -- tell you in advance what those charges will be. (The officers at one of my American banks didn't even know it was happening until I told them.) So if you send £1000 to a British account to pay for a concertina, the seller could actually receive a bit less. (£999.50? £994? It could depend on the intermediary used, and there could even be more than one.) They will not likely be pleased at the discrepancy.

 

I have even suspected large banks which have the ability to make direct transfers of using intermediaries -- presumably in a tacit reciprocal arrangement, -- so that unnecessary extra fees can be collected. Why else would a payment from one of Germany's largest banks to one of Denmark's largest be passed through a smaller German bank, which tacked on its own fee?

 

XEtrade: I haven't used them, and I don't know much about them, but reports comparing their rates with American banks lead me to suspect that my Danish bank's rates/charges are comparable to those of XEtrade. So for me there would probably be no advantage, though for you there might be.

 

other costs: If you don't use an electronic transfer from your own bank, how do you get the money to the other agent? Is it free? PayPal connects to your credit card account. Does your bank charge for that service? According to their web site, XEtrade only accepts electronic transfers. Most banks charge something for such transfers, even though the fee is normally much less than for international transfers.

 

purchase protection: Both PayPal and most major credit cards provide services for protection against bad faith on the part of a seller, though reports of their diligence in honoring such guarantees have been mixed. As far as I can tell, XEtrade doesn't. There are various laws and treaties regarding fraud which may assist you if you use an electronic transfer from your bank, but I'm very unsure of their effectiveness or even what they might cover.

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I have always considered your door to be one-way-only for concertinas. :) I did not realize that they occasionally slip away from you.

I eventually had to implement a one-in-one-out policy :(

 

In this case I had just bought a Lachenal 40 button rosewood ended anglo, so it made sense to sell my Lachenal 30 button rosewood ended anglo. This sort of thing may happen again, but anything made by C***n D*pp** of indeed J*ff***s stays put! Sorry ...

 

Chris

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... your bank: Here's where things get tricky... and can vary a lot. I prefer to use electronic transfers, though I've also used bank checks, which in some cases can be much cheaper.

My experience - admittedly with English banks - is that cheques can be hugely expensive, with 15% or more disappearing into the bank's pocket for exchange and other charges.

 

Chris

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Guest Old Leaky

... your bank: Here's where things get tricky... and can vary a lot. I prefer to use electronic transfers, though I've also used bank checks, which in some cases can be much cheaper.

My experience - admittedly with English banks - is that cheques can be hugely expensive, with 15% or more disappearing into the bank's pocket for exchange and other charges.

 

Chris

 

For those based in the UK, I'd recommend opening a Visa based current (checking) account, or a Visa credit card, with building society The Nationwide. This will give you the "official" or wholesale rates and not the lower tourist or retail rates, and free of the usual exorbitant % fees charged by the other British High St. banks for foreign currency transactions. Where card transactions are not possible e.g. buying from private individuals, foreign currency drafts (checks) also use the higher official exchange rate, which can offset the fee charged compared to the lower travel agent/tourist rate, and are cheaper than electronic transfers. These will entail postage and possible concerns about tracking and confirmation of delivery although special services are available from Royal Mail for additional fees. I ceratinly wouldn't advocate sending cash as this will not be covered against loss. Those travelling/holidaying abroad will also save £s with these cards and will get better a better deal than any bank or travel agent "tourist" exchange rate.

Edited by Old Leaky
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... your bank: Here's where things get tricky... and can vary a lot. I prefer to use electronic transfers, though I've also used bank checks, which in some cases can be much cheaper.
My experience - admittedly with English banks - is that cheques can be hugely expensive, with 15% or more disappearing into the bank's pocket for exchange and other charges.

Cultural differences.

 

It was as a teenager that I was first confronted with the stark evidence that rules and laws regarding money were arbitrary, perhaps "justified" by arguments, but not following from indisputable assumptions. It was when my family travelled across the border between the state of Ohio and the state of West Virginia, stopping at fast food restaurants in both states for meals. In the one state (I've forgotten which), a meal eaten on the premises was subject to sales tax (VAT), while the same meal taken off the premises before eating was not. In the other state, the opposite was true.

 

(I have since come to the conclusion that most rules and laws -- not just financial ones -- are similarly arbitrary, but that's not the point of this discussion.)

 

At both my Danish and American banks the fixed fee for processing -- either sending or receiving -- a prepaid bank check is significantly less than for an electronic transaction. On the other hand, the buy-sell spread on checks is greater, with the result is that checks are cheaper for small transactions and electronic transfers are cheaper for large ones. If the opposite is true of fixed fees in England, it hardly surprises me.

So I repeat my earlier advice:
Check out all the suggestions, and see how the details stack up for your particular transaction.

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... buy-sell spread: the rate they use when selling a particular currency is different from the rate they use when buying (e.g., the dollar amount they charge for £100 is more than the dollar amount they'll pay you if you sell them £100); since this is a difference in rates, it works just like a commission (as if the "commission" in each direction was half the difference in rates)

A fair approximation in most cases, but actually there is no reason to suppose the buy-sell spread is symmetrical about the market rate. So what you need to calculate the true cost of the transaction is the difference between the rate applied and the true market rate.

 

When Paypal came into the market, they beat all hands down for small transactions in the currencies they handle. I suspect this is still true. By the time you get up to larger transactions such as $1000, then paying fixed fees for wire transfers to the likes of xetrade in order to avoid Paypal's %age commissions becomes economic. I do not find xetrade very transparent about what it will cost you, but I observe a couple of satisfied customers above.

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... buy-sell spread: the rate they use when selling a particular currency is different from the rate they use when buying (e.g., the dollar amount they charge for £100 is more than the dollar amount they'll pay you if you sell them £100); since this is a difference in rates, it works just like a commission (as if the "commission" in each direction was half the difference in rates)
A fair approximation in most cases, but actually there is no reason to suppose the buy-sell spread is symmetrical about the market rate. So what you need to calculate the true cost of the transaction is the difference between the rate applied and the true market rate.

Since there's no such thing as "the true market rate" -- i.e., there is no one single rate adhered to by all or even most currency exchangers, not even in a single day, -- I think my suggested perspective is as good as any.

 

The only true rates are those actually paid in individual trades in the currency markets, and those are negotiated separately by the parties involved in each trade. During any given day they might vary only a little or quite a lot. (And in periods of high volatility, agents will tend to widen their buy-sell spreads.)

 

But if your agent won't quote both buy and sell rates, another reasonable substitute for a "true" rate (and I believe the one usually quoted by newspapers, internet sites, etc.) is the "interbank" rate as reported by (among others ) the US Federal Reserve Bank. These are some sort of average of actual market trades during a given day, so of course they can't be computed until the day is over. And if your particular bank/agent did an actual trade to balance up its various currency reserves, it might have paid either more or less than the reported interbank rate.

 

Frankly, I don't know how the different agents (banks, etc.) decide what their buy and sell rates will be, but I'd be surprised if they were seriously asymmetrical about either an actual transaction or the reported interbank rate. E.g., would they be likely to charge only a 1% margin on the buy side if they were charging a 4% margin on the sell side (for a total spread of 5%)? In spite of my comment about rules being arbitrary, I doubt it. Still, what matters for somebody buying or selling an instrument is not how the different agents decide what to charge, but how much the actual charges are.

 

Something I perhaps didn't emphasize sufficiently before is that a single agent will have different exchange rates for different forms of exchange.

  • Rates for cash exchange are usually the most unfavorable for the customer.
  • Personal or institutional checks may be slightly better, but possibly worse. Only banks are likely to accept those at all, and even many banks won't.
  • Prepaid checks (traveler's checks, bank checks, and "certified" checks) usually have noticeably more favorable rates, but may be refused if they're not from a well-known institution.
  • Electronic transfers generally get the best rates (for the customer), because they're the least trouble for the agent.

But fixed fees and "commissions" can skew that ordering for an actual transaction.

 

With a transaction involving a lot of money, it can be worth the trouble of checking into all the options. Maybe on a small transaction, as well, since you could find that the cost of the service is more than the money being sent. On the other hand, in the mid range it might be fair to find a service to which you can say, "It's good enough, and any likely improvement isn't worth the time it would take to hunt for it."

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Indeed! Thanks for all your comments, everyone. I've decided to go with XE. Their initial setup process has been cumbersome, but their support has been good. There's no per-transaction fee, they will mail a bank draft (which is what I needed to have done), and the "buy" exchange rate that I've paid for my initial transaction seems to be at a quite reasonable premium from their publicly posted "mid-market" rate.

 

Daniel

 

Daniel, it's good to have everyone's suggestions, so that you have as many options as possible to investigate, but the details may vary, and your needs may also differ. Check out all the suggestions, and see how the details stack up for your particular transaction.
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