HiFX vs ASB on Exchange rates.
Filed under: Avalon's Money Thread, Banks, Exchannge Rate & Currency Transfers
So, having opened up our US$ account, we needed to put US$10,000 into it.
For the past week, I have been watching the exchange rate, and using HiFX’s online system to check how much in NZ$ it would cost me to buy US$10,000.
I decided this morning after an overnight rise to make the move.
HiFX were quoting
NZ$ 12,632.00
I phoned ASB Global Markets (this is the branch that operates the Foreign Currency Accounts) and got a rate of…
NZ$ 12,618.00
That’s a saving of $14.00. Small but I will take it. Also, over the past few days – its come down from a more expensive NZ$ 12,744. So by waiting I have actually saved $126.
What bugs me though is that HiFX should not be able to be beaten by the banks. Because of the amounts I was looking at there were no fees with HiFX, and yet they still have a rate significantly worse than the bank was offering.
There is something seriously screwed up at HiFX these days. I wish they would sort it out, but given the snotty attitude last time I tried to talk to them about it – I get the feeling the can’t be arsed.
Opening a US$ account at ASB
Filed under: Avalon's Money Thread, Banks, Exchannge Rate & Currency Transfers
We have decided to open up a US$ account here in New Zealand. While our original UK accounts are still active, and based in the UK, we really don’t need a UK£ account here. But the issue we have at the moment is that the shares we hold in IBM are in US$. And while the share price and the dividends we get are quite nice in US$ amounts, once we pay them into our NZ$ account, we really aren’t getting our moneys worth.
So by letting the money sit in a US$ account, we can wait till the rate improves and get a better deal.
For ease we have opened up the US$ account at ASB. Applying is fairly straightforward – the major hitch is that you need to put a certain amount into the account to open it (amount depends on the currency). In the case of US$ – you need $10,000. Not exactly pocket change.
Now we have managed to get that, basically because I have that money in out Tax Savings account. It’s money that really doesn’t belong to us – we will need to pay it to the tax man – but because we are self employed – we don’t have to pay it for ages. So we borrow the funds to get the account set up.
The nice thing is that you don’t have to KEEP US$10,000 in the account.
You just need to put it in there to activate the account. Then you can move it back out when you want to.
There are NO FEES to operate the account. There are some fairly hefty fees if you want to do certain things – like get a NZ$ bank draft from the account – but that is basically the same with any ASB account. And if you wanted to pay cash into the account – that would cost. But electronic transfers into the account, or paying US$ cheques in costs nothing.
Which is good.
What is not so good is that if you do pay a foreign currency cheque into ANY ASB account (whether your normal current account or a foreign currency account) ASB sit on it for 21 working days. That’s basically a month. (Usual guff about money laundering blah blah blah).
In your normal account, it just sits there, gets noted on your statement and is in the Account Balance, but doesn’t get added to the Available Balance until the 21 (working) days are up.
In a foreign Currency Account, it sits in a separate Term Deposit before being cleared and transferred to your Foreign Currency Cash account. If you transfer money from your normal NZ account into the US$ account – that is not held for 21 days and shows up as usual.
Also, its worth noting that from my parents experience, paying cheques into these accounts generates a forest worth of paperwork. So make sure you have a good filing system for it.
Unimpressed with HiFX
Back at the end of July I started looking at making the absolute most of the dire exchange rate, and the possibility of moving some money back to the UK. This was made possible for me by the fact that HiFX – my number one money moving company, were allowing transfers on just $1000 without a fee – whereas before when I used them, I needed to move $10,000.
So I duly moved my $1000, and ended up with £526 in my UK account. No extra fees to take into account and it was all hunky dory.
Then I got a heads up from my mum, who was bringing some UK£ over to set up a Sterling account with ASB, and she was going to be charged a £9 fee by Hifx . She actually ended up using Currency Online – which is a subsidiary of Hifx, and not only got charged a fee – but a hidden cost of £25 in a third-party bank fee sting – that currency Online are fully aware you will be charged for, but hide behind the really shitty excuse that you may not actually be charged so they don’t have to tell you about it anywhere but in the really small print of their T&C’s.
I started looking at Hifx – and yes, if I wanted to re-transfer the £526 back – I was going to be charged a fee.
WHY? I was really confused. Had I somehow managed to get a free transfer? There was no information I had seen, no special code I had entered. So why, the week before had it been free and the next week not?
I emailed Hifx. This was the response:
We have recently changed the way we calculate the cost. We now have decreased the margin on the exchange rate.(i.e. you now get a better rate) and change the fee on smaller trades. It works out to be roughly the same as before.
Now this fundamentally changes the way HIfx works. It has always been a place you could go to transfer currency with no added fees – the exchange rate quoted is the exchange rate you actually get – you don’t have to sit there with a calculator working out the real rate takin into account all fees. Easy. Adding a fee means you now have to take that fee into account when they quote you a rate.
However – this also begged another question – how long had clients been able to transfer just $1000 or £500 instead of there being minimums of $10,000 or £5000.
Now – I want to make something absolutely clear here – when I wrote my book – I double checked facts with Hifx – and there WAS a minimum spot trade allowed of $10,000 or £5000. That was back at the end of 2007.
I emailed Hifx back, asking about this and was told:
The changes came into effect on August 1st. Our previous minimums were NZD 1,000 as you made a trade for this amount to GBP in July. Our minimum is now $50 NZD but the fee charge will make these low amounts not very worthwhile.
Ok, but that still doesn’t answer when they removed the $10,000 / £5000 minimum. So I tried again. And again after 6 weeks of no response. This was the reply:
A response was sent to your previous email, possibly it went into your junk folder? The changes came in to effect August 1. All registered customers were sent emails advising them of these changes, possibly it also went into your junk folder? There was also clear instruction advising of the change on the website as well as in the terms and conditions that you would have ticked the box and confirmed that you had read and accepted. The fee was previously included in the rate but with a number of customers wanting more disclosure. So you receive a better rate but pay the fee. It works out to costing you roughly the same.
You will notice perhaps that it still answers the same question – not the question I actually asked? Are Hifx now staffed with politicians I wonder? Now there’s a couple of points worth noting here:
- All register clients were clearly not sent emails about this – both myself and my mum are clients – and we were not sent an email.
- There is no clear instruction on the website. I tried to find some reference to it when I first noticed. Eventually I found the new fee structure – but no indication of why there was a fee one week, and none the week before.
- T&C’s – I have a certain level of contempt when the best answer a company can come up with is “well you ticked the T&C’s – it’s not our fault you didn’t read them”. While technically true – it shows a lack of understanding – I am certain it always shows a level of hypocrisy, and it means you can’t come up with better excuse.
I was now actually peeved – so I asked again
You started charging $12 transfer fees on transfers under $10,000 NZD on the 1st August.
You have answered that question before – this is correct.
I am asking at what date you started allowing transfers under $10,000 NZD without the fee in the first place. As a client for many years, it was always the case that we had to transfer minimum amounts (unless I have been misinformed by Hifx for years). I managed to make one transfer of $1000 without the fee, and then you changed the system.
I want to know how long clients were able to make small transfers without the fee. 1st August is the end date – I would like you to tell me what the start date was. It’s a different question
(I also pointed out that I was not impressed by the attitude). Now this got passed onto someone else, who rang our home number. My parents gave them my mobile number (which they did not bother to ring), and then for some reason, an email was sent to my parents – not to me.
The back office has passed on your email to me so that I can answer your questions. I did try calling you just now but you were not in.
In relation to when we allowed transfers under 10k NZD, we have for years allowed smaller transfers but the smaller the trade the wider the spread.
As for the change in fee structure, we did send out an email to all our clients prior to the change. I am sorry this appears not to have been received by yourself but we did send a bulk email to every private client with an active account. The contract note clearly lists any fee applied to a transaction.
I would be happy to discuss this with you in detail so please call me on 09
So – at some point (but they won’t tell me when) between the end of 2007 and now – you have been able make transfers of less than $10,000NZD as a spot trade with no fee. They did not in fact fail to send out emails to their entire database of clients – the emails to me and my mum somehow got lost in cyberspace, but they are sorry that we failed to get it – not sorry that they may have missed us off their email list. And who cares – they tell you there’s a fee in the contract note – what more do I expect?
What I expect is for Hifx to retain its reputation for simple, upfront, clear and easy to use currency transfer services, and a helpful attitude when their clients want information and help. I do not expect to get the run around, to have hunt through their website trying to find out what fees they charge, and get attitude when I ask a simple question.
Interestingly, when mum moved a second lot of money – ASB gave her a better rate (no fees) than Hifx. When a mainstream bank beats the currency traders on rates – you know there is a problem. For us – Hifx are toast and we wont be using them or recommending them anymore. Currency online has always been expensive – but it looks like Hifx have dropped to their level, rather than bringing currency online up to Hifx’s level. Interestingly – at the moment anyway – Currency Online have lower minimums before they start charging fees – but ASB is still beating thier rates (once you add in the fees).
All I wanted was to check the dates of the changes, so I could update my blog and add the information to the updates that go out with the E-Book. I really wasnt expecting to have to work so hard to find out the facts. Really disappointed.
Is it worth moving money back to the UK right now? Part 1
Filed under: Avalon's Money Thread, Banks, Economics, Exchannge Rate & Currency Transfers, General Budgeting
I am actually trying to work through this myself, so I thought I would write about it as I’m going along, and see what conclusions I come to. Just so you know, I actually don’t know the answer at this point.
First the reason for thinking about it: The exchange rate is historically low, running at about $1.90 to the UK£. So basically, all being equal, now is the perfect time to sell NZD and Buy UK£. In theory you would then sell the UK£ and buy back NZD when the rate gets to more like $3 to the £.
Let’s look at just $1000.
- Sell $1000 and buy £526 at current rates
- Then when the rate changes to (hopefully) $3.
- Sell £526 and buy $1578 NZD
- Profit: $578
- Which makes a return of a whopping 57% which is something you are not going to get very often.
So why wouldn’t you do that?
Well there’s a few things to take into account.
1/ Interest rates on savings.
In the UK you will basically get 0% interest on savings. So the £526 is unlikely to grow in the foreseeable future.
In NZ however, you can get 3.5 – 5% on savings.
So if we assume that you get the current savings rate at ASB, then the $1000 actually earns you $35.62 (compound interest) a year. Bear in mind that you pay tax on that.
Ok, so that means you need to be able to make at least 3.5% on the transfer back within a year to make it worth moving money to the UK.
I work out that the rate need to hit $1.967 to do that:
- 1035 / 526 = 1.967
Which means that in no way shape or form does the interest earned in NZ outweigh the gains you can make in the UK on the exchange rate, unless you believe that the $ will never go down in value much, and we are looking at a new “normal” of $2.00 to the UK£.
2/ “Time in the Market”.
Its often said that Time in the market is more important that Timing the Market with investing. Ie – don’t buy and sell quickly, buy and hold on for dear life.
So if you can earn $35 a year on your $1000, how many years can you keep the money in the UK and wait for the seemingly mythical $3 exchange rate and still beat the interest rate?
Waiting for $3 : £1 will net you $578 , so you can wait so that’s the equivalent of 16 years worth of interest at 3.5%.
Actually that’s not totally accurate – I worked out that because of compounding, it actually takes 13 years according to MoneyChimp
3/ Will you ever get $3 to the £ again?
Who knows. According to some experts the NZ$ will never go down in value to the same level it was. These are often the same people that say house prices will never go up by the amounts they did in the past. I actually think that’s as daft as saying at the height of the property boom that house prices never go down.
It’s cycles. Money works in cycles. It always has, and I personally don’t see why it would suddenly behave any differently.
But remember, each year, the exchange rate just has to go up a tine bit – the equivalent of an extra $35 ever year to beat the interest you would earn in NZ.
Part 2: What about comparing with a mortgage?
NOTE: This assumes you use a Currency Transfer outfit that has no fees. HiFX have recently dropped thier minimum tranfer to $1000 NZD and 500 UK$ to get fee free transfers.
NOTE 2: Ok – so looks like Hifx havent actually dropped there fees. For some reason I seem to have got a free transfer – but now when I try and do it again they would charge $12 or $9 for the above transfers – with the old limits of $10,000 or £5000 to get fee-free transfers. Bugger.
Making the most of the crap exchange rate – Lightsabres are cheap :)
Filed under: Cost of living, General Budgeting, Getting to New Zealand, Life in New Zealand
Let’s face it – the fact that £1 wont even get you a measly $2 on some days right now makes emigrating to New Zealand hideously expensive. When we bought our house, the rate was at $2.50 or there abouts, and we were practically crying our eyes out then! Right now, we need to bring over about $10,000 worth of £UK to pay for our upgraded insulation – it’s the difference between it costing about £3,500 and £5,000. It is no laughing matter.
Multiply that up for anyone wanting to emigrate and buy a piece of New Zealand? Well -we originally paid $135,000 as a deposit, bringing over about £54,000 which was the money we had from selling our UK home. That meant we had to take out a $265,000 mortgage. At current rates, that £54,000 would only get us about $108,000, increasing the mortgage we need to take out to $292,000.
The cost of the fall in the exchange rate for us personally would have been $27,000 in extra borrowing needed, and that pales once you look at the interest you need to pay over the life of the mortgage.
But is it all bad news?
There is a pale glimmer of good news in amongst the pain – and that is – it’s cheap to buy goods from other countries. We have spoken before about the hundreds of $$$ we save at Christmas by buying books from Amazon.co.uk rather than already overpriced NZ bookshops.
But this week, we saved about $140 on an amazingly cool purple Lightsabre (Mace Windu for my fellow geeks), courtesy of ThinkGeek.com, and the otherwise crap exchange rate.
From Reel Collectibles in New Zealand this would cost $329, plus $12 shipping. From ThinkGeek it costs $US99 , plus $US50 shipping. With a margin for the bank – because they can and they will always syphon a bit off, that came to $ 193.97 NZD.
I make that a saving of $147.03.
Or basically, the cost of a second lightsabre. Or 36 coffees for the non geeks. (Star wars Vs Coffee – Star Wars wins – it’s a close call though!)
Like what Avalon has to say?
Click Here to buy Avalon's Guide or Click Here to buy the E-Book
I really love Amazon.
Right now the benefits of a crap exchange rate are working in the favour of people already living in New Zealand – so it’s worth making the most of it. Even at $3 to the UK£ its often more cost effective buying books from the UK than buying them in New Zealand, but with the rate at nearer $2 to the UK£ – we are laughing.
On an Amazon order of about £180 (the whole family really loves books), I’ve saved about $200 on Christmas pressies purely because of the exchange rate.
I guess that the thing with currency – when it’s bad for one person – it can be great for others.
But there’s also been an interesting development at Amazon.co.uk which can be even better for us. They are now charging in local currency – so if you live in New Zealand and have an NZ Credit card – you can be charged directly in NZ$. You will be told at the time of order, before you confirm, what the NZ$ cost is, and if you switch the currency conversion on, you will have the option of changing your mind before you confirm the order.
This means that you can avoid paying the banks their extra charges and fees they always like to screw us for. You wont get the Interbank rate – but then the banks never give you that anyway – and then they add all the extra fees on top of a crap rate.
I’d use the Amazon converter on principle just to take the fees away from the banks.
It’s worth noting that all the items in your order have to be in stock and ready to ship to be able to use this service. If anything is out of stock or on a delay – you cant use it and have to pay in UK£.
Like what Avalon has to say?
Click Here to buy Avalon's Guide or Click Here to buy the E-Book
Avalon’s Money Thread: Moving your money to New Zealand
Well, I found the whole concept of currency transfers a bit daunting at first. We got caught with the exchange rate in the floor (2.5:1) at the time we had to buy our house so it was all a bit depressing. We only brought over the minimum to start with, and then brought over the absolute minimum to buy the house with. We still have a bit of money in the UK to pay our insurance premiums and stuff over there.
I use HiFX to do all my transfers. I have found that they are really excellent for explaining this without making me feel like an idiot for not getting it the first time. There are no extra charges to pay with them either. No flat fee, payment fees, electronic transfer fees, fees to pay to your NZ bank for the privilege of putting money in. They make a profit but it’s on the difference between the rate they give you, and the rate they buy at.
So when you ask for a quote (for example “I want to sent £10,000 to New Zealand” they tell you the rate and what you will get for it at the other end “The rate is 2.9000 and you will get $29,000” (in my dreams!)
Hifx pay the money direct to your New Zealand bank Account – like this:
Your UK account -to- Hifx UK account (just like paying a bill) -to- your NZ account.
It’s teh same the other way round as well:
Your NZ account -to- Hifx NZ account – to- to your UK account.
Coming from the UK to NZ the delay is in getting from your UK account and clearing into their UK account. This delay is because of the UK clearing system. Update: This should be quicker these days. My UK bank (First Direct) now does the move in 24 hours.
Whatever happens (and again this is what I know of Hifx only), you will be told when you get your quote and agree to the trade exactly how much money will hit your UK account.
It’s worth registering with a few money transfer companies (should be free, if not don’t touch them), and then when you want to transfer, ask all of them for a quote. Get not only the rate but also the total amount in $ that you get at the end. Then take off any fees that are going to be charged at the UK end. And go with the one that gives you the most $$$$ for the least amount of hassle. It’s also worth asking your UK bank for their exchange rates and fees, and comparing that as well.
Hifx have a service where you can set up regular payments from UK to NZ (or vise versa).
From UK -NZ:
The minimum amount is £500 per month, you form a contract for 6-18 months and the rate you get is fixed at the start of the contract.
So you know exactly how many $$$ you will be getting in your NZ account.
You set up a Direct Debit from your UK account to HIFX UK account
Money hits your NZ account about 5 days later
NO CHARGES .
From NZ – UK
Same deal but the minimum is $1000 per month.
If you are in the UK currently, its worth knowing that if you have a Nationwide account you can use your ATM card to withdraw $$$ here with no charge which can be very handy for smallish sums when starting out.
Updates:
MoneysavingExpert keeps a current list of credit and debit card fees for taking money out of ATM’s abroad, and keeps a list of the cards that have no charges for doing this. This is something its worth being aware of way before you move over here, because you will not be able to open an account once you leave.
There’s a new Online company called Currency Online that are part of HiFX. You can do all the trading online without having to call someone and bother with filling in forms. Its very easy to open an account, and they have now removed their silly charges. The rates are still crap compared to HiFX, but its convenient, and you can see the amount of money you get straight away.
Hifx have no changed the way they operate, so you can transfer less than $10000 in a spot trade, but there is a charge. It is no longer as clear cut a service as it used to be.
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
Like what Avalon has to say?
Click Here to buy Avalon's Guide or Click Here to buy the E-Book
New Money Transfer company.
I was contacted a few weeks ago by a company called Currency Online, offering me the chance to become an affiliate and market their product. Of interest was the fact that they said they were part of HiFX, which is the currency transfer company I have always used and recommended.
So I took a look.
HiFX confirmed that indeed CO was now a part of them, and so I looked at the rates.
One of the reasons I really like HiFX is the lack of extra charges. So I was a mite miffed to find that CO were going to charge a whopping £12 every time I made a transfer from the UK. To cover the electronic transfer of funds. {Cough} BS {Cough}.
But hey I thought – the rates are supposed to be the best around – so maybe the rates are so good it will counteract the silly charge.
Um. No.
I’ve been checking these numbers for a few weeks now – and I can categorically say that HiFX still beats CO hands down. In fact the only benefit I can see to CO is that it is – well – online.
So – how did I compare the two?
Well, firstly – I made a spreadsheet to keep all the info together, and make it easier to compare. So at random times (like when I remembered) I would look at three things:
1/ The HiFX website charts which give you the current Interbank Rate.
2/ The current Currency Online price for £5000 to be converted to $NZD
3/ I phoned up HiFX for their current rate for the same trade.
But – you also have to remember the £12 it will cost you to transfer using Currency Online. So – to take that into account I took the amount of $NZ that I would get using CO, and divided it by 5012 (£5012) – which gives you the EFFECTIVE rate at which you are transferring. I then worked out how many $NZ I would get in real terms taking that charge into account.
I also made a note of the difference between the HiFX Rate and the Interbank rate and the CO and Interbank rates. What I got was this:
What this shows is that if you were to transfer £5000, you would overall get about $100 MORE if you went with HiFX, and today – when I actually made a trasfer, I came out better by a whopping $337.
Now – there are some advantages to Currency Online, and ill cover those in a separate blog. But if the main issue is how many $$$ you get – I’m still sticking with HiFX!
Like what Avalon has to say?
Click Here to buy Avalon's Guide or Click Here to buy the E-Book
Avalon’s Guide On Facebook
-
