What is... Foreign Exchange?

Foreign Exchange, also known as FX, forex, or the “currency market”, is the largest and most fluid market in the world. But what is it?

According to Investopedia, Foreign Exchange is: “the market in which participants are able to buy, sell, exchange and speculate on currencies” and are made up of “banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors.”

For people not in the trading business however, Foreign Exchange refers to everything involved in changing one currency for another. Whether for business or your holidays; you take a particular amount of a currency you wish to change, go to a vendor, and get a set amount of another currency back, determined by the exchange rate.

So what’s the trouble?

Although in theory you should get back the same amount of money in one currency that the exchange rate says is worth the money you paid in of your own, merchants will often charge a commission fee for the service or reduce the rate they will exchange currency at.

What does that look like? Imagine a diner charges £3 for food but asks for £20 entry fee, and a different diner charges £8 for food but no entry fee; they may both end up more expensive - depending how much you intend to eat - than a diner that charges £3 on the door and £5 for food.

In the same way, the exchange rates actually on offer and fees paid to obtain them vary, and what is most value for money depends on how much you intend to spend.

"services banks provide often come with hidden charges and fees, many of which customers have no idea about"

But it’s not just extortionate airport services that are charging you for the ability to spend your own money. Foreign Exchange services banks provide often come with hidden charges and fees, many of which customers have no idea about.

So, to save money when spending abroad and navigate the complex world of speculation, ever changing exchange markets, and sudden currency devaluations, here are 5 steps to get the most out of your money and beat the currency sharks:

(1) Know the exchange rate

The best way to avoid getting ripped off is to know what you’d expect to get in an exchange based purely on the exchange rate. Some services charge fees so high that you get far less than the advertised value, while others provide free services on far worse exchange rates than competitors, again losing you money. Know the rate, and you are more likely to spot a good deal, and avoid the bad ones.

(2) Know when to buy...

"it isn’t always in your interest to buy just before you travel"

Whether you travel frequently or know there’s a holiday coming up, the value of a currency changes a lot, which means that it isn’t always in your interest to buy just before you travel. If you see the exchange you will soon need is plateauing or just beginning to drop, you may want to buy some reserves early. This is especially true if the currency in question is widely accepted, such as the US Dollar or Euro.

(3) ...and know where to buy

No airports. In 2012, the Post Office estimated that £21 million was wasted by British travellers a year by waiting to exchange in the airport just before a holiday, mainly due to extortionate fees on low value transactions.

Instead, you can order money online to be picked up at the airport, or check the rates at your local bank or building society, which are often a significant improvement. Remember that the cost to you may vary depending on how much you seek to exchange, so be ready to be flexible with how much you wish to pay in.

(4) Be aware of “Dynamic Currency Conversion”

When using credit cards abroad for purchases, retailers may charge you hidden fees for billing you in your home currency instead of the cheaper local one, and may not even tell you when they do it by default. Make sure you ask to be billed in the local currency if you are unsure.

You can read more about how to avoid Dynamic Currency Conversion from Curve user Rob in our #CurveMoments series.

(5) Keep track of your cards

Certain cards are good for certain services abroad, but most charge hidden fees or have hidden costs users aren’t aware of. Why not make it easier?

With Curve there are no currency conversion fees, and we only add 1% on top of the Mastercard wholesale rate. To withdraw cash from any foreign ATM, we charge a flat rate of £2 to recover the costs. And by adding currency cards, you can spend currencies in their home territory completely for free. Easy.


Frequent flier and well-travelled money manager? Curve helps you get more from your money, at home or abroad.

Curve is a single card and app that combines all your existing bank cards into one. The app and card allow you to upload and spend from all your bank cards using just one Curve MasterCard, unlocking benefits such as: saving money abroad with super low foreign exchange fees, keeping on top of your spending on-the-go with real time notifications, and managing your spending in the app with receipt and expense management tools - all in one place. Download Curve today on Android or iOS