As we recover from the overindulgences of the festive period, many of us begin to think of the ambitious plans we have for the year ahead. New Year’s resolutions can cover all manner of things – from bungee jumping to improving your diet, but for those setting their sights on a fruitful 2015, it is important to spare some thought for the health of your personal finances.
For many expatriates living in the UAE, there will come a time when you will need to make an international payment to another country – perhaps your country of origin. If you are transferring money overseas regularly, these transactions should form a key part of your personal finance planning – so specific attention should be paid.
As we kick off 2015, now is a good time to harness New Year motivation to find the best foreign exchange services available. So here’s how:
Compare, compare, compare
One of the first actions on any foreign exchange health kick is to look into the array of international payment providers out there and what they can offer. There is a wealth of providers to choose from, from banks to foreign exchange specialists. Once you know the options available, you’ll be on the right track to choosing a provider that best suits your needs.
What it costs
As part of your research, it is important to assess the exchange rates and transfer fees that could be applied. It is worth noting that in many cases banks can charge a margin of 3 to 4 per cent on currency transactions. It is smart to shop around to compare the exchange rates on offer – you could end up finding a provider that saves you a significant sum.
Track the rates
Take into account exchange rate fluctuations. Even small currency movements can have a knock-on effect on the final value of a transaction. For instance the rate of the dirham against the British pound fluctuated from a low of 6.31 to a peak of 5.70 in 2014 – creating a difference of £1,696 (Dh9,462) in a transfer of Dh100,000 during this period.
Speak to the experts
It is important to speak to your foreign exchange provider to understand the currency risk that you could face. A currency expert is able to offer guidance on different currency markets and help you to take steps to manage your risk of exposure to volatile exchange rates.
Weigh up your options
Foreign exchange can seem complex and risky, but you should be aware that there is a range of tried and tested products available to support your needs. When looking at the international payment providers available, be sure to ask questions to find out more about the services and products on offer.
Save on monthly remittances
If you are making regular payments – let’s say to pay a mortgage outside the UAE – it could be worth considering a forward contract. This allows you to agree an exchange rate in advance so you know exactly what rate you will get on the day you make a transfer. Locking in an exchange rate is beneficial as it manages the risk you are exposed to from significant currency fluctuations.
For instance, if the currency of the country where your property is based appreciates over three months, a forward contract for that same period would guarantee you a previously agreed exchange rate on your transfer. This means you know in advance how much the transfer will be worth, ensuring you have complete clarity in your financial planning.
This guide will help you to form an international payments plan that suits your requirements – be it a transfer for savings, a mortgage or a bill payment. Once your foreign exchange is in check, you will have the peace of mind to make the most of ambitious plans for the year ahead.
Matt Leonard is the managing director of international payments at Moneycorp.
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