The cheapest ways to buy expensive forex

Forex sellers at airports keep a margin of 16-18%, money changers charge up to 3.5% and banks up to 2.5%. But online sellers typically work on margins of 0.5% above the interbank rate


Hemant Mishra/Mint
Hemant Mishra/Mint

Are you planning to travel overseas this holiday season? Once you have decided the destination, booked your tickets and got the visa, the next task at hand is arranging the currency of your destination. Many travellers buy foreign currency notes or forex cards from their banks, and some even at the airports. There are also those who swipe their international debit and credit cards, instead of converting currency in India.

However, with the advent of the online forex market place, now you have the option to buy it at the best available price without visiting multiple money changers or banks. Mint takes a look at the options on offer and whether you should opt for them.

What’s on offer

There are over 10 online portals that offer forex or forex-related services to individuals, according to Traxcn, a data analytics company. Bookmyforex.com, buyforexonline.com, fxkart.com and extravelmoney.com are some of the companies in this space. These are online markets to buy and sell foreign currency. You can also make international money transfers. They allow you to purchase currency notes, prepaid travel cards, traveller’s cheques, foreign currency demand drafts and make wire transfers too.

Most companies offer all the major currencies that can be purchased in India as per the Reserve Bank of India’s (RBI’s) regulations. However, the number of currencies offered varies. For instance, fxkart.com offers 27 currencies, whereas doorstepforex.com offers 23. You can use these websites to purchase currency for personal travel, business travel, education, emigration, employment, medical, and maintenance of close relatives staying abroad. These companies usually have a partnership with money exchange companies and banks. They work like aggregators, collecting data from money changers and banks in your locality, to offer the cheapest rates. “At the back-end we tie up with all the major money changers. When we take money changers on board, we check their licences. As soon as a customer places an order, in the back-end the money exchangers bid. The one who quotes the cheapest price, gets their prices displayed. This works for the customer as she is getting the best deal available in her locality,” said Abdul Hadi Shaikh, chief executive officer, Fxkart.com, an online forex aggregator launched in January 2015.

These companies service selected locations. For instance, bookmyforex.com offers services at over 5,000 locations, while extravelmoney.com is available in over 4,000 outlets. The online forex aggregators earn revenue from listing fee and commissions from money changers and banks. “Money changers are charged a listing fee. Then there is a commission for every transaction. It could be a percentage of the amount or a flat fee,” said Shaikh.

How to buy

If you plan to buy forex from a portal, you need to provide some details before buying. For instance, if you go to bookmyforex.com, you will have to enter details such as: your city; the currency you need—say, dollar or pound; the product you are looking for—card, currency notes or traveller’s cheque; and the amount. Forex cards are usually cheaper than currency notes. You can also request a better rate and set an alert for it. Once you book the order, your details are verified. You will need to provide know-your-customer (KYC) documents to verify your transaction. Documents for this purpose include: passport, confirmed air tickets and valid visa where needed.

Most websites offer doorstep delivery too. This cost is extra and varies by the city. For instance, bookmyforex.com charges Rs100 for door delivery in most cities, if your order is between Rs25,000 and Rs74,999. If the order total is over Rs75,000, there is no door delivery charge. You also have the option to pick your forex from the nearest exchange that you choose. For payments, you can either pay it online or directly when you receive the forex currency or card. These websites act as facilitators. Hence, the transaction is offline or directly through the money changer or a bank from where you will get the money. If you want to pay online, you can do a fund transfer to the account provided on the payment processing page. If the amount is below Rs50,000, you can pay in cash, or through Net-banking, or credit and debit cards. For higher amounts, you can opt for national electronic fund transfer (NEFT), real time gross settlement (RTGS) or pay by cheque or a demand draft. Most of the online portals offer forex at interbank rates, plus 15% service tax.

Where should you buy?

The cost of purchasing a travel card or foreign currency tends to be lesser from an online marketplace than buying from a bank directly. “Traditionally, money changers, airports and banks keep a margin. In case of airports, it is 16-18%, money changers keep a margin of 3-3.5% and banks offer forex at 2-2.5% margin above interbank rate. In case of aggregators, the margins are about 0.5% above the interbank rate,” said Ananth Reddy, founder and managing director, buyforexonline.com.

As a starting point, do your research on at least the major online forex aggregators. Next, compare the prices with your bank for the same products. Remember that the currency rates move based on the supply and demand in the market and, hence, vary across cities. Some websites allow you to set an alert for better rates too. If you are asking for doorstep delivery, factor in that cost too while comparing rates. Doorstep delivery is not available for all cities. Remember that exchanging from foreign exchange outlets at airports is a very expensive option. “There is a cost of the real estate attached to the airport, making the exchange rate even more expensive,” said T.C. Guruprasad, chief executive officer and managing director, Centrum Direct Ltd, which runs buyforex.com, an online forex portal. Do remember to check if the money changer is an RBI-authorised dealer. Always ask for a bill. In case any of the money changers ask you for extra money or fee, beware that there is no such fees and you can inform the aggregator about any extra money demanded.

So, next time before buying foreign currency, shop around for the cheapest rates.

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