Currency conversion

June 8, 2005 2:32 AM

What is the most cost-effective way to convert $40K US dollars into pounds Sterling?

The money is currently in dollars in my US bank account, and I want it to be in pounds in my UK bank account. Both banks offer terrible exchange rates. Criteria for success: (1) Good exchange rate/low commission (2) Money not stolen by unscrupulous operation who disappear into night.

posted by anonymous to work & money (7 comments total)

How long do you have? I would look for options to pull the money over using an ATM card, as these tend to give you the interbank rate. Depending on the bank account, you might be able to pull $500 per day. You could open a second account and pull twice as much. Some banks / accounts will even let you lift the cap by special instruction. A friend's brokerage account did this to enable him to make a large direct debit payment. The UK ATMs may only allow you to pull £300 at a time, but if you're patient this is a good way to get a really competitive rate. Then just pay in the cash over the counter.

As a caveat, it's good to make sure your bank doesn't impose per use fees for transactions of this kind. Some accounts will waive ATM fees if you have a minimum balance, so most of your transactions could be free, until you reach the limit.

It's also worth noting that the UK does have some tax rules about (re)patriating income from sources outside the UK. However, using an ATM would be pretty hard to trace if you're not inclined to declare it, which, given your anonymity, I presume you are not.
posted by sagwalla at 4:01 AM on June 8, 2005

I do what sagwalla said. I have my money in dollars in an HSBC US account. I can withdraw it at an HSBC UK ATM with no fee and the exchange rate is 1% over Interbank, both from what they claim and my own calculations. It's kind of a pain, but dollar cost averaging is built into the method.

For the kind of money you're talking about and bringing it over at once easily, I'd look into Citibank's expat services. They advertise no fee, but I'm not sure what the exchange rates will be like.
posted by grouse at 4:48 AM on June 8, 2005

Don't know what bank you're banking with, but the most efficient as in "fast" way to move money is to wire transfer it. Now, whether or not you want to do that will depend on the legitimacy of the transaction, since wires are pretty much one of the most scrutinized transactions these days, but it's fast.
posted by Medieval Maven at 5:05 AM on June 8, 2005

What do you need the money for? As others have said:
- For day-to-day expenses, I'd use an ATM to get what I needed. You get close to the interbank rate and no commission charges (although FYI I think Visa now charges 1% per transaction on top of any other charges for cash advances to a different country than the one the account is located in). Get the max. each time to minimize other per-transaction service fees.
- For transferring it all at once, ask the bank about wiring (ask about limits on how much you can transfer per day to keep things legal); wiring is v. easy once you get it set up.
- If you have no immediate need for the cash maybe leave it in USD as long as possible as USD/GBP is not so good now and will probably get better over the long term.
posted by carter at 6:20 AM on June 8, 2005

Legal option:
First of all, if you've got 40K to change you're in a good position to negotiate the exchange rate and transfer fees with both banks. If you've never done this before, get a face to face meeting with your local banker (and a phone meeting with the UK bank afterwards), explain that you are looking for the most cost effective way to transfer 40K and that currently this bank's rate is unacceptable, could we reach an agreement or would you care to lose a client to a better bank? Repeat over the phone with UK bank. I strongly recommend to take this route and negociate.
Illegal option:
Undeclared cash sent in a suitcase/stuffed in a teddy bear, whatever.
Grey zone option:
Well, depends if you have balls/are desperate, I guess. There's a system called "hawala" (means "trust" in arabic) and originates from countries without bank accounts. Hawalers are people that do hawala, they're usually in big cities and have (shady) contacts in foreign countries.
This how a hawala transaction works:
You go to your local hawala, you negotiate an exchange rate (usually much lower than official rates), you give him 40k cash, he gives you contact info (a code usually) for his associate in London, another hawaler. You give the contact details (or code whatever) of the english hawaler to whoever is suppose to pick up the money in London. Next day your friend pays a visit to the english hawaler and if all goes well your friend gets 40k cash immediately.
The system totally bypasses banks, exchange rates and operates in a grey area.
Then again, this may go against your 2nd criteria for success.
posted by ruelle at 6:29 AM on June 8, 2005

I've heard good things about XEtrade.
posted by zsazsa at 6:35 AM on June 8, 2005

This is why God gave us Forex (foreign exchange) dealers. Have a chat with your independent financial adviser in the UK who'll be able to set you up with one. Haven't got one? Find one but make sure that he's independent and not tied to a particular institution - i.e. the nice man in LloydsTSB is worse than useless.
posted by dmt at 9:00 AM on June 8, 2005