Moving Money Between Countries as an Expat

Well, it’s official. We sold our flat in Prague! (“Kafkaesque Paperwork” post coming)

Last month, I said we flew to Prague to sign papers to sell our flat. We did, we have, and it’s done. Yes, we no longer own property in the Czech Republic. (Yeah!)

Owning foreign property these past 9 years has been a good adventure for us. And selling it was a great move for us. To best understand why the timing was good, read the end of the last post.

The Problem: What To Do With This Money?

We now have a new “problem.” Lots of money in Czech Koruna. And this money sits in a bank account in Prague. But we want that money in the form of Canadian dollars, in our local (Canadian) bank account. How to get it there?

The Money Shot
Dramatic money shot. This is only 50,000 CZK, worth about $2500 US.

I’ve talked about moving money before. But the amount I have to move now is (by far) the most I’ve ever moved. Before, the most was when we bought our Prague flat – I wired US dollars to Prague for our down payment. That was just a down payment, for our flat’s purchase 9 years ago.

Today, we’re talking about the full balance of the flat sale, after years of renters paying down the mortgage. Yup, a big money move. Taking a bad approach can mean the difference of thousands of dollars vanishing in fees or a poorly executed exchange.

Below, I’ll first cover the choices I have. Then how they differ (easier said than done). Finally, we’ll end with my choice. On to the show…

Let’s Talk Choices

Like I said above, we have choices. We could use a local bank, a mega-global bank, an online payment company (rhymes with “SaySal”). And there are countless boutique foreign exchange (“forex”) middlemen.

Hell, CNN even wants to exchange your money…

There's money to be made
Go home CNN, you’re drunk.

 

In the end, the best thing we can do for ourselves is research and compare. And your research starts with our research.

PayPal

Let’s talk about PayPal first. They’re an easy target. PayPal will wire money for you (their fee is just under 3% if sending more than $125,000). That seems small at first, but later in the “rates & fees” section, I’ll show why it’s not a smart choice. If you trust PayPal with this much money, you’re a more forgiving person than I.

Banks

Okay, moving on to the banks. We have a choice between our local Czech bank and other banks. There are small-time, “local” Czech banks and there are the mega-corporate European banks.

Either way, our money will have to go through one or more intermediary banks for the exchange. Each bank, each step, will include fees and/or a marginal “take” for themselves. Trading this way reminds me of a jail rape, with a few unseen prisoners between you and your cellmate, all getting in on the action. And all leaving you with a gap where your money should be. (wow, that got way more graphic than I intended.)

ATM?

When people ask what’s the simplest way to exchange money for a tourist trip, I always recommend the ATM — at the destination. Decent rate, small fee. But can I do that? Hell no; my daily limit would have me visiting a our bank machine for years. And the little “convenience” fee amounts to a lot when so inconvenienced.

ForEx

Decentralised but regulated, you have ForEx (foreign exchange). A trading post that essentially exists to trade money for money. These guys have one job: to route money from one account to the other. Their overhead costs are next to nothing, unlike real brick-and-mortar banks. The negative is, you can’t just choose one that sounds good. Do your research to know which is the right one for you.

…the best thing we can do for ourselves is research and compare.

Now, Let’s Talk Rates & Fees

I appreciate you’re not all bankers and money traders. So, let’s get clear on the terms.

Fees

When I say “fee,” I’m talking about a deduction from your total sent. Let’s pretend you want to send US$500 to the country Balonia (yes, made up).  To send $500, your bank will charge a fee to handle that transfer. Now, you’re in effect sending $450-$475. The intermediary bank(s) might also take a little, so you’re sending $440-$465. And the receiving ‘Balonian’ bank will show the balance in their currency, Baluns. And you check your Balonia bank account balance every hour for the next 3-5 business days – finally finding most of the money you sent.

Rates

Let’s pretend a US$:Balun exchange rate of 1:1000. You saw the rate on the Internet, so you expected 500,000 B in your Balonia account. Instead, you see 452,345 B. Why? Where did that 10% go?

First, spoiler alert: for every exchange, there is not one rate. There are two.

Exchange rates, coming or going
Coming or Going – choose your rate!

Depending if you’re coming or going, you have a Buy/Ask rate and you have a Sell/Bid rate, respectively. Give me a few more words and pictures, this is easy.

If you’ve travelled, this picture should look familiar. Every airport has a kiosk offering money exchange. A short list of flags, two columns of rates. If you’re carrying “home” money, looking to buy local money, they will take your money (foreign to them) and give you the local cash.

Back at the airport, any leftover vacation money, you can sell back to them to get your “home” money back. In both directions, you can expect them to offer you a rate that favours them. It’s business.

Good Rate or Bad Rate?

Every airport kiosk, bank, etc – I ask the same questions: is that rate a total rip-off?

TIP: don’t pay attention to the rate. Pay attention to the spread. The difference between the Buy & Sell rates? That’s the spread.

Sure, I get it – everybody who deals with money has to cover their costs. But the spread doesn’t have to be a total gouge. Check out this asshole kiosk guy:

Feat_valuutavahetus
Click to expand for gory spread details

I’ve been to Tallinn, Estonia. Lovely city. And an amazingly progressive country. But having rate spreads of 35%-45% is nothing short of criminal.

Finally, Let’s Talk What I Do

I gotta stick to my principles.

Principle #1: pay as little as possible for someone else’s overhead. = ForEx.

Principle #2: choose the best rate and most reputable = Research

I’m a fairly transparent guy, so you can probably guess what I do.

My limit of research is understanding the terminology and doing due diligence. But I know my limits. I do my research, plus consult with others, then I get quotes to be sure.

For ForEx research, I turn to these researchers on foreign exchangers.

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Jeff

An American who likes to move around. I now live on the eastern Canadian seaboard. My job? A stay-at-home dad for two cute but demanding bosses. My wife? Also cute; not so demanding. My wife and I both love travel. We met in South Korea, travelled across Australia, India, Europe and beyond. We lived in Czech Republic for four years. Many stories to tell and experience to share. If you let me, I will help you travel as we do. Enjoy.