Are you living, or planning to live, in Europe, and wondering when to convert dollars to euros? Are you annoyed with the unfavorable exchange rates and expensive fees? In today’s growing world, many people, such as US expats, need to convert their US dollars to euros, or vice-versa. It can be a challenge to know the best ways to manage your finances across borders and avoid unwanted hidden fees.

Calculating the transfer amount

When exchanging money, it’s important to take into account all the fees that will impact the final transfer amount you will receive:

• Exchange rates: Currency exchange rates continuously fluctuate. The US dollar and euro tend to stay relatively stable – which does not mean, however, that it doesn’t fluctuate. 
• Transaction fees: Banks and financial institutions charge fees to facilitate and convert currencies. These fees can eat into your funds if not managed carefully.

Smart Currency Exchange Strategies

• Multi-currency bank account: Certain banks and institutions will allow you to keep accounts in multiple currencies. This can greatly reduce exchange fees, and provide easier access to the currencies you need.
• Dedicated foreign exchange (FX) service: Today there are many online platforms and banks that will charge a much smaller transaction fee than classic banks. It is worth shopping around and/or opening an account if the savings are substantial.
• Timing is everything: If you have the time, it might be worth waiting for a change in the exchange rate. Reach out to an experienced cross-border Harrison Brook advisor for advice on timing your transaction. (See case study below.)
• Lock in rates: Some banks allow you to lock in an exchange rate for a future date. This can be particularly useful when you’re regularly transferring funds, and you expect the exchange rate to become less favorable in the future. 
• Batch transactions: Larger transactions tend to have better transaction costs. To save on fees, batch multiple transactions together wherever possible, especially if you have regular or future cash needs.
• Check twice, everything nice: Always check your currency options for payments or deposits. It may be more advantageous to receive certain deposits, for example US social security (https://www.ssa.gov/international/countrylist6.htm), directly in euros to your European bank account.
• Regularly review your needs: Currency rate fluctuations can have an impact on your budget and expected cashflows. For example, if you receive a regular monthly amount from an American annuity, a change in the USD-EUR exchange rate could impact your monthly budget. It’s worth regularly reviewing your financial needs and knowing where you are most vulnerable to exchange rate risk.
• Compliance: You must keep up to date with all tax implications and reporting requirements when dealing with multiple currencies. Don’t hesitate to reach out to a Harrison Brook cross-border advisor to ensure you’re compliant with local, international and US laws.

CASE STUDY

Last year, a client wished to transfer $500,000 from her US savings account to buy a house in France. As the home purchase process in France is rather long (link to article moving to France: buying or renting a property), in reality, she had roughly 3-6 months to transfer the funds. 

As July was the lowest exchange rate of the year, it was feasible that the exchange rate would change by the end of the year. By waiting just 3 months and using a more cost effective exchange platform, she was able to save €37,000, which was a savings of more than 7% of the total amount.

– July 2023: ($500,000 – 2% US bank transaction cost) x 0.89 exchange rate: €436,100 
– October 2023:  (500,000 – 0.3% transaction cost of online platform) x 0.95 exchange rate: €473,575

The Harrison Brook Multi-currency Investment Platform options

Harrison Brook offers both short-term and long-term solutions that will get the most out of your currency exchange. For short-term needs, we can set up a low-cost brokerage account, enabling you to exchange funds at the lowest cost and a favorable rate. For long term, multi-currency requirements, we work with custodians who allow accounts in both US dollars and euros, so that your investments can remain in either currency over a longer period of time. These unique solutions help you leverage market fluctuations effectively, ensuring you get the most value from your currency exchanges.

Peace of Mind with a Harrison Brook Cross Border Advisor

In a global life with multiple currencies, it’s well worth being aware of the currency exchange process and all the fees. But if you feel overwhelmed, why not opt for peace of mind by working with an experienced, cross-border advisor at Harrison Brook. We are here to assist you in managing your financial assets, so don’t hesitate to book a meeting with us.