Alternatives to Using Banks for Foreign Currency Exchange Transfers
For a long time Australian banks enjoyed a near monopoly on foreign exchange transactions in and out of Australia, at least as far as individual expatriates were concerned. However, there are now have a number of web-based, specialist foreign currency transfer companies to choose from, including OFX, an Australian company listed on the ASX and holding an Australian Financial Services Licence (No. 226484), with whom we have partnered for many years.
Australian regulations require licensed foreign exchange dealers to meet strict capital requirements and employ a range of internal procedures covering; risk management, staff training, accounting and audit to name a few. These requirements were introduced in 2001 to enhance consumer protection and it goes without saying that you should only transact with a licensed dealer.
The company provides an immense amount of data and information on forex through its website, OFX. It offers lower or no fees compared to its banking rivals and effectively gives an individual access to the much more competitive corporate rates. The table below demonstrates the scale of savings that may be made on a transfer of a relatively large sum from the UK to Australia in 2023 and are indicative. Bear in mind that relatively greater percentage savings are typically available on smaller transfers because of the better rates and absence of fees.
This is an example only of the scope of potential savings - the bank rates are those published on their website and better rates may be available on request, but unless you are a corporate we believe the Australian banks remain stubbornly and outrageously uncompetitive when it comes to personal transfers - and that comment extends to rates offered by domestic banks in most countries. The moral is - make comparisons and potentially save yourself thousands of dollars on transfers.
Potential Savings made on a transfer from the UK to Australia
OFX vs. Bank (July 2023)
|GBP to Transfer||£300,000||£300,000|
|Client Receives AUD||$559,500||$573,000|
|Transfer Fee AUD||$30||0|
|Potential Saving via OFX (AUD)||$13,500+|
Even if you are not in a position to use a company like OFX because of your location or other considerations, you should compare your alternative means of transferring money, and the costs, using something like the above table. It is particularly important to manage your transfers cost effectively when making large transfers - perhaps from the sale of a house overseas to Australia. Even the "special migration forex rates" that some banks offer are not necessarily attractive or cost effective - it will pay to make comparisons between the various providers.
The Problem with (Awful) Foreign Currency Cheques
For their own reasons, it remains quite common for overseas companies to send cheques quoted in a foreign currency to Australian expatriates (and others) who have returned to residency in Australia - these often include investment payouts or pension transfers. Cheques are not just an inconvenient means of transferring money, because it may take weeks for local banks to clear them, but they are costly because the exchange rate provided on cheques is normally even less competitive than you would receive on a telegraphic transfer. Many Australian banks, including CBA, have also simply simply ceased to accept foreign currency denominated cheques entirely. If you have a choice, you should normally choose a telegraphic transfer.
Everything possible should be done to avoid receiving an international cheque, and if the organisation making the payment requires a "local bank" to transfer the funds to, then it may be possible to have the payment made directly to an OFX bank account in that country and have the proceeds automatically (and cost effectively) transferred to your designated Australian bank account.
If you have no choice, and the cheque value is fairly large, then consider establishing a foreign currency account at your Australian bank and paying the cheque directly into that account. This gives you the opportunity to have the forex transaction done by someone other than the bank, such as OFX, and for you to choose the most appropriate time for the forex conversion to actually occur.
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