A spot contact is most used if you just want to make a single payment or payments, Then make sure you get the best rate available. No matter how much money you need to transfer internationally from a large one off transfer to smaller payments but on a regular basis the process is the same if you are using a currency exchange company or a bank.
Spot Contract using your bank or currency company
If using your bank then you instruct your bank on how much to send and the date you want the funds to hit the beneficiary’s bank overseas. When calculating the amount due in the overseas local currency, the bank will instruct the buyer of the cost and they will be debited accordingly. Within 5 days of instructing the bank, the funds in the designated currency will arrive and clear at the overseas destination.
With a spot contract the commission, currency exchange rate and fee structure imposed on clients by the banks can be extremely confusing and through this confusion, the banks are able to relieve clients of substantial sums of money without them even realising it.
“Britons buying property abroad could have lost out on up to £1.8 billion because of high-street banks offering such a poor deal on foreign exchange, according to new research.”
Even though you can never buy currency at the rate quoted on the news, the interbank rate gives you an indication of where the rate is and what direction it’s moving in. It also gives you a rough idea as to how much currency will cost you.
When you do decide to buy currency or make an international payment the institution that you do it through will put a ‘mark-up’ over and above the interbank rate. So – if the interbank rate for a pound is equal to €1.23, you should expect to buy euros at a discounted price of €1.21 the difference representing the mark-up.
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