Whether you are looking to send money abroad for the purchase of an overseas property, paying a mortgage, sending money to a friend or simply making a one-off transaction we’ve put together a glossary of common terms you’ll need to know. For many sending money abroad for the first time can seem slightly confusing. Both Banks and Foreign exchange brokers can use unfamiliar terminology when explaining the process.
Transferring your money to a Broker or Bank
BACS – Bankers Automated Clearing Services – This process for sterling clearing usually takes 3 working days and is free. You can initiate a BACS payment via Internet or telephone banking.
CHAPS – Clearing House Automated Payment System – Is the fastest method for transferring money from your bank account into the Brokers account. A CHAPS payment is generally a same day payment however each bank will have a cut off point in which your transaction must be made in order for your funds to arrive at the destination account that same day. CHAPS payments can be initiated over the telephone or at your local branch. You will be charged by your bank for making a CHAPS payment. Fees will vary depending on the Bank.
Currency contracts and terminology
Spot Rate – Is the foreign exchange rate at which two currencies can be exchanged in two working days time. This is likely to be the rate offered by a Bank.
Spot Transaction – Is the exchange of one currency for another at an agreed rate for settlement in 2 working days time.
Forward Rate – Is the rate two currencies can be exchanged on an agreed date in the future at a specific rate. Forward rates can be set up to two years in advance. Brokers will offer this service.
Forward Contract – This is an agreement between you and the broker or bank stating one currency will be exchanged for another on a future date at a specific rate. You will generally be required to pay a deposit of up to 10%.
Order – You can specify an exchange rate that you would be happy to buy or sell at. The broker will then transact on your behalf (order) when the rate has been achieved.
Stop Loss Order – This facility is used to limit risk from adverse exchange rates. You specify a currency exchange rate, if that rate is reached the exchange will automatically be carried out. Please note the currency rate used for a stop loss order is always worse that the current market rate. It is used so that you do not have to constantly monitor rates and enables you to be protected against negative movements.
Settlement Date – The date in which one currency will be exchanged for another.
Hedge – This is protection against future currency movements.
Recipient bank account details
IBAN – International Bank Account Number – This is a series of letter and numbers that identify an individual bank account overseas. It contains two letters referencing to the country code followed by two digits and up to 30 alphanumeric characters for the individual bank account.
SWIFT BIC – Swift Bank Identifier Code – This is the international sort code of the recipient bank.
Visit our currency comparison tables to view the leading foreign currency brokerages and high street banks that will help you send money overseas.
