How to pay for your French holiday
Like most private holiday rentals, we are not able to take credit cards because of the costs so we have spent some time thinking about the ways you might get money to us without incurring a lot of fees along the way. If you have any suggestions or actual experience that would make this document better we would welcome your comments. Roughly in order of easiest and cheapest to most expensive these are some options:
Involving no currency exchange:
1a. Euro to Euro
1b. A$ to A$
With currency conversion:
2a. UK Sterling to Euro using TransferWise
2b. Outside Europe to Euro using Currency Fair
2c. Using a forex broker eg OzForex, UKForex
2e. Bank transfer
1. If you don't have to make a currency exchange.
1a. Euro to Euro
If you have a euro account in the SEPA (Single Euro Payments Area) then we will send you a copy of our RIB (banking details) and you should be able to transfer money at zero or little cost as a 'domestic' payment. Cost is ZERO to VERY LOW.
1b. A$ to $A
If you are a fellow Aussie you can transfer your rental payment within the Australian banking system. We will send you our bank details with the booking information. To find out how much to pay in Australian dollars, go to the Currency Fair site (www.currencyfair.com) and use the calculator. Click on the arrow in the “You Send” box and set the currency to AUD. Set the “Receiver gets” box to EUR and enter the number of Euros you want to buy. Hit “tab” and the calculator will tell you how much that will cost in AUD. Use your internet banking to send us that amount. The main advantage with this method is you just use your existing internet banking, you don't have to register with anyone. Cost is LOW.
2. If you have to exchange currency.
Paying for foreign bed and breakfast or private rental accommodation where the owner doesn't take credit cards has always been a bit tricky. They don't take credit cards because of the monthly and percentage costs of doing so but apart from fronting up with a wad of cash, what options are there? The starting point for exchanging money is the interbank rate. The "real" value of your dollar, pound or whatever against another currency is the interbank foreign exchange rate. This is the exchange rate that major financial institutions use when they do business with one another. They are dealing in millions at time though. As a consumer at the bottom end of the banking food chain, you are a price taker rather than a price maker and often the price you are asked to take is not very attractive. You can get a mid-market indicative rate at any time from the calculators on the home pages of ozforex.com.au or ukforex.co.uk. Anything you get less than that is a cost of your holiday.
Companies make money out of foreign exchange by charging a fee, setting an exchange rate in their favour or both. It doesn't really matter which way they do it, what matters is the end result. If my $1000 is worth €700 on the wholesale interbank market, how close can I get to that on the retail market? The answer varies a lot. If I front up to a booth at the airport I might only get €650 (and yet I still see lots of people do this). Even "commission free" doesn't help, the sting is just hidden in the exchange rate.
In an ideal world, retail customers would be able to get the interbank rate less just enough commission to make it worthwhile for someone to run a business. The advent of the internet has made that almost possible. There are at least a couple of companies who have worked out the best way to reduce the cost of cross border, cross currency transactions is to not actually send or exchange the money. They do that by matching people with opposite currency needs. So I have A$ in Australia but need € in France. A hypothetical Aussie expat is earning money in Europe and needs to send it to Australia as A$. If I put my A$1000 in his Australian account there are no fees or costs. He puts his €700 in my French account, again no fees. The end result looks like we have both have done a forex deal, we both have the currency we want in the location we want but no money crossed borders or was actually converted. All you need is a company with all the right safeguards and approvals to make that happen in a secure and trusted fashion. Someone likened this to internet dating for currency - but without having to have so many awkward coffee shop first dates. See Transferwise and Currency Fair below.
2a. UK Sterling to Euro
Have a look at ww.fxcompared.com to get an idea of the market. TransferWise seems to be a good option with an exchange rate at the mid-market rate and a low fee structure. From their web site at transferwise.com "If you're converting from GBP/EUR, then payments up to 200 GBP/EUR cost you a flat fee of £1 or €1. For larger payments we charge just 0.5% of the payment amount". The payment into our French account will come from Estonia as a SEPA payment (see 1a. above) and should be treated as a domestic deposit transaction with no fees. We have used TransferWise for a Euro to GBP transaction and it was quick and easy. Looking around the net for people reporting problems only revealed positive stories and there are a few TripAdvisor entries relating to people using TransferWise to pay for accommodation in Europe. Cost is LOW.
2b. Outside Europe to Euro
Currency Fair, registered in Ireland but with offices elsewhere, deals in the following currencies (at Sept 2013): AED, AUD, CAD, CHF, CZK, DKK, EUR, GBP, HKD, HUF, NOK, NZD, PLN, SEK, SGD, USD, ZAR. It is likely more currencies will be added over time, website is http://www.currencyfair.com. Started by an Australian expat working in Dublin, Currency Fair has a similar back story to TransferWise with the realisation that there is a lot to be saved by avoiding transferring money internationally through the banks. Currency fair has an unusual attribute though, you can actually ask for your own exchange rate and see if someone will buy. This might be useful if you are not in a rush to exchange currency and feel the market is moving in favour of your currency. Like all these organisations, they are subject to anti-money laundering provisions and are required to properly identify you. This was going to involve scanning and sending photo-ID and two utility bills but because I was visible on the Australian electoral role, they phoned me the day after I did my on-line registration and by quoting a Medicare number over the phone my identification was complete without any effort at all. See a review at Choice: http://www.choice.com.au/reviews-and-tests/money/banking/travel-money/overseas-money-transfers.aspx. Cost is $4 , €3 or £3. Cost is LOW but you have to register.
2c. Forex broker like OzForex or their subsidiary UKForex.
Perhaps better for transfers of larger amounts of money because for small amounts, the flat rate fee of $15 or £7 becomes more important. We have used OzForex several times and it works perfectly. Before using them again we would get an indicative price from Currency Fair for comparison. Need to register and cost is MEDIUM or MEDIUM HIGH for small amounts.
We accept PayPal into our French account in Euro. Paypal has the advantage of ubiquity but is not a low cost option. You will need to add 3.5% to the payment you are making to cover PayPal fees and send the payment in Euro to our PayPal address. Cost is MEDIUM.
2e. International Bank Transfer
It will come as no surprise to our Australian visitors, and probably not to bank users elsewhere, that the banks like to gouge fees here. A healthy fee for initiating the transfer, a hidden fee in the terrible exchange rate and then to rub your face in it there may be fees from the destination bank. I've done this once and will never do it again. It cost about $50 to send €600 to pay for accommodation in the Cote d'Azur and even then I only ended up with €580 at the other end after the French bank put their hand in the till. I include banks here only to illustrate how good the other options are. Cost is HIGH.