Getting the best foreign exhange rates

[Dingo Games]

A lot of us indies get paid in US dollars and have to convert them into our own home currency. Most people people probably just convert this money over at their bank. However, I have begun to notice the difference in between the buy and sell price at my bank (I believe that it is called the spread). It is around 4% at my bank. Which means that the bank is taking about 2% of my money over the optimal exchange rate that I should be able to get.

2% doesn't seem like that much until you consider that this is on your entire income. And the bank is taking this money from you for doing virtually nothing. So, my question to non-US indies, how do you exchange your money? Do you just use your bank and forget about it? ... what about people that are making significantly more money (say hundreds of thousands of dollars), where 2% is really quite significant. Is there a better way to exchange money for large amounts?

I am in Canada, so I would personally like to hear from any Canadians that have found a way to get a good exchange rate. So far, the most practical thing that I have found is to do my conversions with ING Direct where the spread is a bit better (2.9%).

[Tertsi]

PayPal exchanges my money and I find the exchange rate much better than my bank's so I don't lose so much because of it.

[tolworthy]

I hope people don't use my current method. I just got sent a cheque for some work I did on a comic book. First, I lose on the spread. Then I wait up to SIX WEEKS from when I deposit the cheque to when the money appears in my account. Then the bank takes its charge (minimum £7 = $14). And the small print says that the bank at the other end might take another fee as well. Then I notice that the dollar-sterling exchange rate is awful. Considering that most of the things I buy are computer or entertainment related, and the prices are almost equivalent in dollars and sterling, I am not exaggerating when I say that well over half of what I earn is flushed down the toilet.

[Shaz]

I used to write puzzles for magazines in the US and UK about 6 years ago. They would always send my payments by cheque, and the exchange rate was pretty good to AU$ at the time. But there'd be a fee of AU$10 PER CHEQUE (up to a third of my total payment sometimes) and a minimum 4 week wait for funds to clear. I'm soooooooo happy that Paypal now lets me bypass all that nonsense for any overseas payments!

[Sillysoft]

I had previously just been letting my bank do the conversion into Canadian. Plimus recently added a feature that will convert your USD earnings into your local currency using their partner E4X. They said it would give better exchange rates. I set my prefs to use it, but haven't checked on it (till now).

I just did some calculations based on my last 4 payments from Plimus, 2 converting at my bank (RBC) and 2 converting through their new E4X partner. The rate is compared against what the Bank of Canada (http://www.bankofcanada.ca/en/rates/exchform.html) said the exchange rates were on those days:

Dec 15 2006
boc rate is 1.1574
RBC exchange got 1.1386
Effective rate was .0188 under boc

Jan 15 2007
boc rate is 1.1681
RBC exchange got 1.1570
Effective rate was .0111 under boc

Feb 15 2007
boc rate is 1.1639
Plimus E4X exchange got 1.1372
Effective rate was .0267 under boc

March 15 2007
boc rate is 1.1758
Plimus E4X got 1.1456
Effective rate was .0302 under boc

So doing the math, it seems like Plimus' exchange partner is costing me more. That kinda sucks. I'm not sure how these rates compare to the ones you're getting. Care to post the actual historical rates you've gotten for comparison?

[Nexic]

I hope people don't use my current method. I just got sent a cheque for some work I did on a comic book. First, I lose on the spread. Then I wait up to SIX WEEKS from when I deposit the cheque to when the money appears in my account. Then the bank takes its charge (minimum £7 = $14). And the small print says that the bank at the other end might take another fee as well. Then I notice that the dollar-sterling exchange rate is awful. Considering that most of the things I buy are computer or entertainment related, and the prices are almost equivalent in dollars and sterling, I am not exaggerating when I say that well over half of what I earn is flushed down the toilet.

Same deal with me. Ask whoever is paying you to split up your cheques into several less than $2000. So $6000 would become 3x$2000. Cuts the wait down to about 2 weeks and usually saves you a bit of money with the fees.

[Shaz]

So doing the math, it seems like Plimus' exchange partner is costing me more. That kinda sucks. I'm not sure how these rates compare to the ones you're getting. Care to post the actual historical rates you've gotten for comparison?
With my payments, it wasn't the exchange rate that was necessarily better or worse between Paypal and the bank, but the massive fee the bank charged to do the conversion - $10 a pop. If Bank of Canada doesn't have an extra charge for the service, you're probably better off sticking with them.

[tolworthy]

Same deal with me. Ask whoever is paying you to split up your cheques into several less than $2000. So $6000 would become 3x$2000. Cuts the wait down to about 2 weeks and usually saves you a bit of money with the fees.
Thanks for the advice. This qcheque was actually a one off, and not game related. A few months ago I helped a guy write material for a comic book, and I didn't expect any money (It's a fanboy thing), so the cheque was totally unexpected. I don't want to look a gift horse in the mouth, so just said thanks.

It's for much less than $2000 but I still haven't seen the money. I got a letter from the bank over three weeks ago saying it was in the system, and that's all. I'm pretty sure it was a banker's cheque (drawn on Bank of AMerica) and not a personal cheque, so I don't think there is any danger that it will bounce. I figure that either the banking system is grossly inefficient, or they hold onto it for the maximum six weeks quoted in order to keep a few pence of interest at my expense. Or both. Needless to say, when my game finally goes online any money transfers will be strictly electronic.

[Dingo Games]

So doing the math, it seems like Plimus' exchange partner is costing me more. That kinda sucks. I'm not sure how these rates compare to the ones you're getting. Care to post the actual historical rates you've gotten for comparison?

Sure. Obviously there is going to be some inaccuracies because the exact rate will depend on the time of day that you do the exchange (I used the boc rate at noon). My bank is TD Canada Trust, btw.

December 7 2006
boc rate is 1.1469
TD rate is 1.1296
Effective rate was .0173 under boc

January 5 2007
boc rate is 1.1755
TD rate is 1.1527
Effective rate was .0228 under boc

February 28 2007
boc rate is 1.17
TD rate is 1.1483
Effective rate was .0217 under boc

Average rate under boc is .0206

Some banks have their rates posted so that you can compare buy/sell rate. TD Canada Trust has it here:
http://www.tdcommercialbanking.com/tradefinance/rates.html

The difference in between buy/sell for Canadian dollars is .043. Which essentially means that they are taking .0215 on each direction of the trade. (Notice that this figure does agree with the figure I computed above .0206)

ING Direct has their US exchange rates here:
http://www.ingdirect.ca/en/acct_rate/pd_usdisa.html

The spread for them is .029. So they are taking .0145 on each direction. This seems quite good compared to other banks.

RBC has their rates here:
http://www.royalbank.com/rates/cashrates.html

The spread for them is .0456. I'm a bit surprised over this one because the rates that you posted for them seemed quite good.

The best place I have found so far is ING Direct, which should save me about .5% on average. But I still think these rates are horrible considering how much work the bank is doing. There must be a better way to get good rates. I have heard that if you are trading a large amount of money you can ask the bank for a better rate. I don't know if that is true.

The other thing that I have been looking for is some kind of company that specializes in doing exchanges. There must be places out there that does exchanges for cheaper, considering the amount of profit that could be made.

I found this site: http://www.tranzfers.com/
Their spread is better at around 2.2% but they don't seem to trade in US dollars.

Another (more complicated) possibility would be using a service that is designed for forex traders like this one: www.interactivebrokers.ca. If you trade in high enough volume ($25,000) the rate they give you is really really good. It would be very close to the bank of canada rate. The spread is like 0.1%. However, I'm not sure if it would actually be practical to get your US money in there, switch it over, and then get it out, without incurring too many fees, etc. The service is obviously setup for serious traders, not people who want to convert their paycheque. Also, having $25,000 to trade at a time would be an issue (you would have to save it up for a while before converting it all over in one big chunk.. you would have to make sure to have a US dollar savings account with a decent interest rate).

[Sillysoft]

I'm thinking that banks probably give different rates depending on your status with them. I have a business account at RBC, so maybe that helps. It would probably be worth talking with somebody at the bank to see what the full deal is. Or what you could do to have them give you better rates.

I like my payments being hassle-free, so the idea of adding another financial service just for the exchanges doesn't sound like fun. I thought Plimus' E4X partnership sounded like a good no-hassle solution, but in practice it hurt, not helped.