Banks can charge up to 7% on Forex transactions. A number of banks (Bank of America, Bank One/First USA, Chase, Citibank, Diners Club, HSBC/Household, MBNA and Washington Mutual/Providian) recently settled a class action lawsuit "In re Currency Conversion Fee Antitrust Litigation" but they continue to charge huge spreads on Forex payments.
How can the banks get away with it?
A few reasons, first, it's not illegal. Second, there are companies that offer reasonable rates on Forex payments (such as 1% instead of 7%) but very few use these services. Third, banks are overcharging on the spread, it's not actually a fee (although it becomes their profit). Since many don't understand how the Forex markets work, they don't calculate how much they are losing on these transactions. Finally, since banks are typically the source of funds, many people feel it's more convenient for the banks to process their Forex payments, or aren't aware there are alternatives.
What are spot rates?
When you trade Currency you must exchange one for another. Using an example of US Dollars to be exchanged for Euros, you would use the EUR/USD pair as a price reference. Forex traders who speculate in the market trade on spot rates, for example 1.3549 / 1.3551 - this is a 2 pip spread, or .02%. In the above mentioned case where banks charge 7%, this is roughly 700 pips making the spread 1.2849 / 1.4251. It's virtually impossible to get spot rates on a Forex payment transaction, however it is very possible to get close, which is referred to as 'near spot' which can depend on many factors including the currency in question, the size of the transaction, and the market price at that time. Forex payments are referred to as 'deliverables' or 'payments' in the Forex trading community.
Why use Elite E Services (EES)?
Elite E Services was founded originally in 2002 in New Zealand and opened in USA in 2006 with a focus on international markets and macro analysis. EES has vast experience in the Foreign Exchange markets on multiple levels (as a trader, Forex services vendor, and end user being in international business); as such EES can advise on a multitude of situations.
- EES works with several payment processors thus being able to source the absolute best rate.
- EES has a footprint in the United States, Asia, and Europe.
- EES is a regulated company and only works with regulated companies for Forex payments. EES is a Forex CTA registered with the CFTC and NFA Member (373609).
- EES can provide FX advisory and hedging.
http://eliteeservices.net/currency-payment/
