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Do you want to avoid foreign exchange fees? Do you still use the banks to convert your funds in other currencies? In my previous foreign exchange post, I discussed the Norbert’s Gambit. It’s definitely one way to improve on your foreign exchange fees but it can have its disadvantages. On the other hand, a better way to do foreign exchange on a regular basis is to use a forex broker platforms. I have not personally used one of those platforms yet but I have looked into a couple of them and I am hungry to know more. Before we dive into the forex platforms and what they can do for you, I’d like to establish the scenarios under which people tend to do foreign exchange.
Foreign Exchange Scenarios
Currency For Trip
Be it a family vacation, a personal or a business trip, going to a foreign country usually requires funds in the countrie’s currency for your day-to-day spending. In some cases, your VISA or Master Card can cover many of the expenses but having cash on hands is beneficial too. In those cases, the cost of exchanging your money doesn’t add up to a large amount. Some will use the banks but when available near you, a currency exchange office will tend to beat the bank’s exchange fees. However, I would avoid the airport’s currency exchange as they tend to know you are desesparate 
Foreign Investments
This is a common one for Canadian when we want to add some U.S. stocks to our portfolio. Something I do in my RRSP account. In the case of foreign investments, the amount of money that one will convert from one currency to another can be relatively large leading to higher cost in fees. This is where you start to really think about the savings you can have by finding better rates. A really small percentage can really add up
Moving To Another Country
Aside form the major life style transition, you need to think about possibly move large amount of money into another currency. I have many co-workers that have moved from Europe to Vancouver for work and many have actually used a forex platform.
My Foreign Exchange Needs
As it turns out, I work for a U.S. corporation and aside from my pay being in Canadian dollars, any stocks I get are in U.S. I know many others are in this situation too and it basically requires us to move money around in either currencies. I already tried the Norbert’s Gambit and I can’t say that I will use it regularly with my current discount broker.
My Foreign Exchange Process
Here is what I currently do:
- Wire transfer the proceed from my company stock account to my U.S account at my bank
- Get a bank draft form the bank (free of charge)
- Exchange my bank draft at a local currency exchange office offering the best deal I can get
- Deposit the cheque at my back (no hold on the cheque)
Forex Platforms
There are many forex platforms out there and it’s not always clear what you should look at to be honest. We see many reviews about discount brokers but not much about forex platforms. I know that Interactive Brokers does forex, if you use it as a discount broker, but they have monthly fees for having an account. I also found XE.com based in Canada but the lack of reviews and the requirements for a U.S. account in the U.S. are demanding.
This is an area where I lack experience and I am definitely not here to highlight what platform is best but I have a need for it to save a buck So readers, do you have any experience with a forex platform that you would like to share?
Image: cooldesign / FreeDigitalPhotos.net
I haven’t indulged in forex trading and I found your post very interesting! Maybe someday! The currencies are too volatile right now for my taste!
Moneycone recently posted..Unconventional Wisdom In Personal Finance
@MoneyCone
It’s not so much that I want to do forex trading for a profit but rather understand if it’s worth being on a platform just to exchange funds. The savings can be massive over what the banks offer at the counter, online or with their discount broker.
Great question Passive. Wish I could help but I have no experience with forex what-so-ever (^_^;) It’s funny how foreign exchange is the most liquid market in the world and almost everyone uses it at one point or another, yet we don’t hear much about how it’s traded. Maybe your European co-workers can give you some tips (^_-)
Liquid recently posted..Saving With A New Perspective
I’ve used xetrade for a number of years now with no problems at all. Mostly to convert USD to CDN – I live in Canada but work for a US company that pays in USD, so I need to convert quite often. It doesn’t require a US bank account – I have two bank accounts at BMO, one in CDN currency and one in USD. Once you set up the accounts in xetrade, it’s very simple to do a trade. It will ask you which account to use as the source, which one as destination. You can specify the amount either in CDN or USD, etc. When you’re ready to go you hit the “quote” button and get a real-time quote before you commit. Their spread is much better than the banks.
The only downside is that it can take a few days for the transaction to complete because assuming you use EFT it needs to authorize and transfer the money out of the source account, then EFT it to the destination account. So it can take up to 1-4 business days, although usually for me it’s about 1-2 days. If you’re in a hurry you can do a wire transfer but that will cost extra.
@Marc
Thanks so much for sharing your experience. I have US accounts at my bank here so I may just look at trying XE. EFT do take some time for me too when I transfer from my employee stock account to my bank.
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