FX for actual use (property purchase)

[HarbourMaster]

Hi please pardon me if this question sounds too stupid.  I am an IG user but only for my ISA.

I have a need to exchange a large sum of USD into GBP (and transferring funds from overseas).  I am doing this for an actual need -- for a property purchase.  Can I do this in IG?  What would be the typical overhead of doing so?  

I only know of another option, which is to buy GBP from my banks but their overheads seem to be way higher than the typical spreads that I can see in IG's quotes for forex. 

Thanks!

-- HM

[RANZ]

use transferwise, exact exchange rate you just need to pay their fee. I have converted quite large sum in different currencies and transferwise is the best. you need to download their app. Its is EU regulated org based in Brussels, BE.

[HarbourMaster]

Ranz,  thanks for the suggestion!

I just went to transferwise.com and got a quote.  Assuming a transfer of USD 100K into GBP.  The fee is 0.46%, which is indeed better than the 0.63% that I can get from my bank. 

Converting that into dollar amount, that means the transaction overhead is  ~460 USD (*) 

This is okay.  But I am just curious ... to help me understand more about forex trading. 

If (around the same time) on IG I saw the quote for GBP/USD for sell/buy was 1.24873/1.24888, does that mean if someone sells 100K USD and then immediately buys it back, she would get back USD 99,987.9892 ( 100000/1.24888 for the selling and then *1.24873 for the buying), so the overhead for the TWO transactions are ~12.01 USD.  Can I say, then, that roughly the transaction cost for each transaction is half of that or about 6 USD?  So the overhead seems to be much smaller.

My other question -- also out of curiousity -- is this.  It seems that I could do the first transaction (selling 100K USD and getting 99.989K GBP into my IG account) and then just tell IG that I am going to take out the GBP position in my account?  Is this allowed?  Wouldn't this let me accomplish the transaction with an overhead of ~6 GBP.  (This is also assuming that I can make a free international bank transfer, which I think my overseas account may allow me to do that)

-- HM

(* I was using the exchange rate from xe.com at the same time as a reference to calculate the overhead.  I think my calculation was correct, and it is consistent with the fee that transferwise.com shown on the website (0.46% vs 0.45%).  The minor difference may be due to the flucation of exchange rate while I checked).

[RANZ]

The odds with changing money with IG is they decide the rate, it could be better than the bank but can never be as on exchange as for example on Transferwise, if you want to check you can compare live exchange rate on IG and transferwise. What I'm presuming you're not after trading because say if you open a position just to convert the money and an instant spike can increase or decrease the original amount if you're open to risk you can take chance but 100k  just in one position is quite risky you might think of opening smaller positions but again you need to manage risk and need to check what conversion rate IG offers.

Also wherever you go your conversion beware of all the hidden charges etc.

 

Hope it helps.

[goldenbrown]

After a quick search: Compare International Transfer

I just turned 50 K (GBP) into Euros using this company https://www.smartcurrencyexchange.com/

Definitely better than the bank (HSBC)

Don't know about IG services

[HarbourMaster]

Hi I am answering my own question now -- after some helpful discussions and more reading.

I CANNOT use IG to exchange currencies for actual use.  This is because IG allows only CFD trading (contracts for difference), so I am not able to buy actual currency but just contracts betting on the future price of a certain currency.  IG's DMA (Direct Market Access) is also built upon CFD so it is also not for actually currency trading.

Thanks!