Moving to Spain - Currency

These days there are many options for currency exchange other than your high street bank so it's worth looking into all of these well in advance especially if you're dealing with large amounts as it could mean several thousand more in your account at the other end.

The principal methods of moving money between countries, especially when the currency is changing as between the UK and Catalunya, is via a bank or specialist currency service. There are also internet services that take a cut in return for putting private individuals wanting to exchange currency in contact with each other but these are in their infancy and this page will concentrate on the two more established methods.

Points to remember

Don't move large sums of money between countries in cash. It may seem obvious but whether for legitimate reasons or not some people do.

You'll obviously need a bank account at the other end to transfer the money to, but check thoroughly as many banks in Spain and Catalunya charge to receive funds despite the promises of banks and brokers sending the money that all charges are paid by the sender. Either way specify that you want to pay all charges by the sender and ask if they guarantee this.

Start looking into moving large sums well in advance. This enables you not only to thoroughly research the companies offering an exchange service but to keep a long, close eye on the exchange rates and get the best deal.

Remember there are two charges you will pay:

◊ The obvious charges - eg fees or commission

◊ The hidden charges – the exchange rate you get. The old trick of offering currency exchange commission free means nothing if the rate you get is low.

The best comparison is simply to ask how many Euros you'll get for you money after all charges.

Banks

The high street banks should be your first point of call in order to establish a benchmark quote. It's very unlikely they will provide you with the best or even a competitive quote but it's a starting point and gives you a good indication of the amount of money you could save through a specialist exchange broker.

The other option is to try the Spanish or Catalan bank you've set up your account with. Many will offer the facility to have accounts in both Euros and Sterling and can sometimes give surprisingly good rates occasionally even completing with the brokers.

Specialist foreign exchange services

Specialist brokers will almost certainly beat the high street bank rates typically offering within 1% off the interbank rate (the rate used for exchange between banks), whereas banks may be as much as 2-3% more expensive. However there will still be differences between brokers and as every point of a percent translates in to extra money for you it's worth shopping around between as many as possible.

Brokers may be a little sketchy as to their exact charges from an initial telephone enquiry but don't necessarily take this as a negative as rates change constantly and it may depend on the amount of money you are transferring. Most require you to open a no obligation account with them before they'll give you an exact quote but if after opening an account they are still vague, go elsewhere.

There are usually two different options for buying currency from a broker. The first is a spot contract rate which will get you the best rate and is executed at the moment you give the verbal authority. The second is a forward contract rate, which will require a deposit, where you can choose to buy currency at a specific date or within a certain time period in the future for a pre determined price. This may be the best course of action if you think rates are going down but are not ready to exchange now, but the rate will be lower than the spot rate of the same day.

Another slightly more complicated route is to have a contract that either sets a lower rate (stop loss order) or upper rate (limit order) to buy at. These options should be researched directly with the broker as they may vary in options, conditions and charges and are usually used by people with previous experience and a more in-depth knowledge of the currency market.

Is my money secure?

Foreign exchange brokers don't have to be regulated by the FSA so it's worth not only researching the best deal but the reputation and background of the broker you choose. Generally the big established brokers tend to have good reputations and offer a professional service. The following check-list should be of help.

◊ How long have they been in business?

◊ Are they speculating with your funds, or simply buying to order?

◊ Are they registered with HM Customs as an overseas money service provider?

◊ Do they have audited accounts at Companies House?

◊ Any other market memberships or associations?

◊ How many staff do they have and how big is the business?

◊ Are your funds held separately from other company assets in a designated transaction account?

◊ Do you know anyone who has used this type of service and were they happy with the broker they used?

The process

Set up a no obligation account with several brokers you judge to offer a good rate, good service and be of sound reputation.

Get specific quotes for the amount you plan to transfer with all charges included remembering to ask exactly how many Euros you'll get and what exchange rate they are working from.

Watch the market over a decent time period and decide for yourself which direction you think it's going. Many brokers will call you on a regular basis to inform you of potential impending ups or downs in the rate but remember their guess is purely that, a guess. They do have access and knowledge of the market but they are also trying to get you to execute the deal in order to earn their commission so don't do anything until you are absolutely ready.

Once you are ready to proceed and have the funds available you can instruct your broker to buy the Euros. The currency will be bought straight away with a spot contract or at or within a specified date for a future contract but either way and you're legally obliged to complete the deal, so be absolutely certain.

You will then receive a contract note or invoice which acts purely as a confirmation of the deal with instructions on payment.