Becoming increasingly frustrated with often inexplicable banking charges I decided to explore ways that I could save money when banking online. Over the last couple of years a myriad of new financial services providers have come forward offering a myriad of solutions to this problem. One of the best options I've come across is a service provided by UK based Payment App Revolut.
Revolut enable peer to peer payments as well as offering the ability the hold money in a range of currencies within their app. They also issue customers with a virtual prepaid MasterCard that can be used when shopping online. For a small fee you can also have a physical MasterCard delivered within a few days to quite an extensive list of locations around the world.
The App offers a couple of interesting features including the ability to get an SMS notification every time you use your card, the ability to place various restrictions on your card, e.g., by location or to online only. You can even turn off your card if you think it may be lost. What excites me most about the service is the ability to purchase foreign currencies at the interbank rate.
Typically banks (and others who offer foreign exchange services) make their money in two ways:
1. A mark up is charged on the spread between the inter bank price (the daily currency wholesale market rate) and the rate that the bank charges it's customers to buy or sell currency at (the bid and ask price).
2. A commission is charged to facilitate the transaction. Some credit cards even charge a service charge for making overseas payments - both on and offline.
Try it out for yourself using this free FX tool from XE.com available here. These guys provide a currency conversion tool that's set at the daily interbank rate. The next time your looking at the price of something in a foreign currency compare the result you get from XE.com with that of your regular bank or payments system.
The difference in price may be the amount that the bank or charging you to handle the foreign exchange element of the transaction. Note, however, that it's very important that you also take into account any variances in taxes when comparing prices across currencies as variances can sometimes have more to do with variances in tax systems than anything else.
These charges can be as high as a couple of percent so if you're spending a lot of money overseas you could be really losing out if you're not careful. This means that you can save a significant amount of money when travelling if you use a service like Revolut which doesn't place the burden of such charges on their customers. If you're in business then it's also worth noting that Revolut are now offering business accounts which are also offering great savings for businesses that trade internationally across different currencies.
Note, this post does not constitute financial advice. Personally I've been delighted to save money using this service and am happy to share my so far very positive experience with you guys. As with any online service I'd recommend reading the small print fore making your own mind up. Perhaps you've already used the Revolut Payments App or even another similar service? Let me know in the comments!