Online rates - how accurate are they?
One of the most common ways to ascertain whether you are being given a good exchange rate or not is to head over to google and compare it with what you see online.
The online rate you get is however not the rate you should be comparing to.
Let's look at two typical scenarios why not.
1. The importance of the Interbank / Mid Market Rate
What you would like to see online is the mid market rate so you could truly ascertain whether your rate was good or not.
The mid market rate is the rate that banks buy and sell currency to each others (lets call this trade price) and this is not freely available to members of the public. In fact organisation such as ourselves have to pay a subscription in order to be able to access mid market currency rates.
Importantly, you should also be aware that exchange rates float freely against one another, which means they are in constant fluctuation. They do not change once per hour or even once per second but constantly.
Therefore the currency rate you see online is more than likely a rate which already has a margin applied to it or is out of date.
Importantly, you should also be aware that exchange rates float freely against one another, which means they are in constant fluctuation. They do not change once per hour or even once per second but constantly.
Therefore the currency rate you see online is more than likely a rate which already has a margin applied to it or is out of date.
2. Indicative rates
So we know we don't get to see the mid market rate online but what is that we do see?
We see what is commonly known as indicative exchange rates. These are floating exchange rates that are not locked/fixed at the time of viewing.
This means it is not the exchange rate you would actually get if you traded.
The exchange rate you would actually get would be the foreign exchange rate at the actual time you made the transfer or conversion to an overseas currency.
In other words what you see is not what you get.
Read the small print
Careful reading of disclaimers and small print on websites will uncover statements such as:
- The currency rates shown on this page are a close election of what is available to traders right now.
- With more than 160 currencies and hourly updated conversion rates.
- We work with independent third-party market research companies to gather data on price and fees. These exchange rates were obtained online at 12:00pm on Thursday 6th February 2020 (this was copied at 14.29pm on the same day so the rate was already out of date).
- All figures are live mid-market rates, which are not available to consumers and are for informational purposes only - self explanatory.
Conclusion
We all want to access the best possible rate for our money transfers that we can, but comparing it to internet pricing is not the best way to achieve this. Not only is it ineffective but time consuming and tiresome to do so each and every time you need to buy or sell forex.
Follow these simple rules to get constantly great rates
- Negotiate your spread, fees etc upfront for all your trades - not a different deal for each and every transfer you do.
- Make sure you are being given proof of the true mid market rate and final exchange rate you secured.
- Only deal with organisations that are completely transparent with their fee structure and spreads.
