Currency exchange appears to be one of the most complicated and confusing topics when it comes to personal finance management. In fact, many people have come across a situation when they need to exchange money, whether it is for travel, school, work, business, or real estate. The exchange rate matters a lot and can impact your bottom line.
But how do you find the best exchange rate?
TORONTO, ON / ACCESSWIRE / May 15, 2019 / If you’re willing to do a bit of work before your holiday trip or currency purchase, you may be able to save some money. Skip the visit to your bank when buying US dollars.
With the current exchange rate for US dollars around 75 cents CAD/USD, banks add a steep markup to the rate you see when you buy from the bank. This can be painful. Being interested in in the personal finance space, I am not a big fan of the big banks. They are convenient, but there are better options out there.
What Are the Alternatives?
Those that have extensive cross border experience often don’t use banks. Recent Canadian fintech companies have started to take on the big banks in many verticals, and one of them is within foreign exchange.
A fast-growing Fintech company, that is frequently recommended, is Knightsbridge Foreign Exchange. This is an alternative option that can be used for getting competitive exchange rates on US dollars for Canadians.
“Banks have large market share and don’t need to compete on price for your business. I think they take your business for granted, expecting you to pay steep markups because alternatives were not easily obtainable. KnightsbridgeFX was created to provide better rates and compete with the banks.” Said Rahim Madhavji, President of Knightsbridge Foreign Exchange Inc.
Most customers simply think of their bank first when it comes to currency exchange. As a result, most customers are price takers. Banks are also a familiar option where many people feel comfortable exchanging money. However, that can come at a cost.
Mr. Madhavji added:
“Bank markups are about 2.5% and can vary. This can lead to hundreds to thousands of dollars in currency fees paid to the bank. The best option is to compare prices to make a better decision.”
Why do Canadian Banks Struggle to Offer Competitive Rates?
Banks have large overhead costs that need to be offset by currency exchange fees charged on their services. Big branch costs and an inefficient model that was not built purely for currency exchange means these costs all get added and passed on to the customer. Foreign exchange is also one of many products the banks offer and it is not their pure focus.
Moreover, the banks have not had pressure to offer better rates. Simply put, they have recurring customers will pay their price and the markup is hidden with the exchange rate. Since the fees are not split out, it is harder for the customer to know exactly what they are paying.
The best strategy for Canadians is to call their bank for an exchange rate and check with another provider, such as KnightsbridgeFX. Simply having more than one option can let the consumer know the amount that may be saved and the decision can be made from there. If it is a significant enough amount, you may want to consider ditching your bank for currency exchange.
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