If you like certainty in your finances, particularly if you’ve got a major payment coming up and fluctuations in the exchange rate could have a big impact, then a forward contract can provide you with a clear cost.
Forward contract offers budget certainty
A ‘forward contract’ protects against subsequent rate movements because it allows you to secure a prevailing exchange rate for up to two years. (A forward contract may require a deposit.) Fixing the rate means that you can develop a clear budget plan and be certain that any required payments – from property purchases to a destination wedding or overseas tuition fees – can be made in full and will be affordable within your budget. Exchange rates can fluctuate by as much as 10% or more over a periods of extreme volatility, so the cost in sterling can be significantly impacted and you may end up paying more than you bargained for. You also however need to be aware that the prevailing rate on the day may end up being better than your forward contract rate.
How do I know if a forward contract is right for me?
There are a range of other tools available. You can make a payment on any given day with the current exchange rate using a spot contract. Alternatively, you can track a desired rate and receive an alert via email and SMS when that is reached so you can make the currency exchange when the rate suits your budget. If you’re certain of the requirement, you can also place a market order, which tracks your desired rate and the currency is automatically exchanged as soon as that rate is reached.
A currency specialist can help with guidance and a range of tools
We offer all our clients a professional service that helps you transfer money across borders. As well as a range of tools, like those to manage risk like the forward contract, we can provide guidance on the activity in the market and ways to manage your money overseas including an online account and automated regular payments. All this and you’ll enjoy great rates and lower fees than most high street banks.