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Featured - Account Types
What type of savings account do you need?Find out about the different types of savings accounts available to suit a variety of needs.
Savings
ISAs
Residential
Buy to let
Specialist mortgages
Featured - Debt and your credit score
How debt impacts your credit scoreA healthy credit score has its benefits, so make sure you manage your debt correctly.
Loans
Featured - Life Insurance
Life InsuranceFor peace of mind that your loved ones will be supported financially after you die, consider taking our life insurance. Find out more and compare policies.
Home & vehicle
Health & travel
Featured - Switching deals
In need of a cash boost?Providers often entice new customers with cash incentives for moving current accounts. Compare deals and find out how to make the switch:
Current accounts
Featured - Purchase Cards
Best purchase credit cardsExplore the best cards with a 0% introductory period.
Credit cards
Credit repair
Calculators & guides
Business savings
Business products
Business insurance
How much can I give as a cash gift?
How much can I give as a cash gift?Will your loved one's gift be tax affected?
Categories
Featured guides
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Latest news - by category
Other money & finance news
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Whether you’re transferring money abroad for business purposes or personal reasons, you may have come across the term forward currency contract. This kind of arrangement can be a great way to give you some certainty when it comes to exchange rates and costs while avoiding currency fluctuations, but what exactly is a forward currency contract, and how can you make it work for you? We take a look.
A currency forward contract (or foreign exchange forward contract) is a written agreement between two parties to buy or sell foreign currency on a specified future date at a pre-agreed price. The currencies to be exchanged have to be agreed in advance, as does the exchange rate (which will be based on the rate at the time you make the contract) and the eventual date the transfer is to be made, at which point the transfer will happen automatically.
Essentially, it’s a way to buy the currency now and send it later, allowing you to avoid market volatility in the interim period and lock in the price you pay, which has the potential to save you money.
You may need to use a forward currency contract if you make regular international money transfers in a business capacity, perhaps to pay staff overseas or import/export goods, for example. By locking in an exchange rate and transfer date ahead of time, you can plan your costs more effectively, giving you a greater level of certainty when it comes to your cashflow.
Yet it can be just as beneficial in a personal capacity, perhaps if you’re buying property overseas and need to make sure a payment will arrive on a set date, or if you regularly send money to support a family member living abroad. In both of these scenarios, you can again benefit from payment certainty, which can be particularly beneficial in the case of a property purchase where you need to make sure that an exact amount is transferred.
Here are the steps to arranging a forward currency contract:
Ultimately, the benefit of forward currency contracts can also be its downfall – by fixing a rate in advance you’re protected from losses, but will also miss out if currency values improve, so it’s arguably a bit of a gamble.
Yet for those who need to transfer money regularly, or who have a particularly large transfer coming up, using a forward contract to hedge currency risk could prove beneficial. Not only can it give you certainty – both in terms of dates and payment amounts, allowing you to budget effectively as well as plan your calendar – but it also has the potential to save you a lot of money, particularly if the market has moved against you in the prevailing time period. This is especially true in the case of substantial transfers, where even a slight fluctuation in exchange rates can have a significant impact on the eventual amount paid.
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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
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Black Friday is one of the biggest shopping events of the year. Some deals on this day can save UK consumers a significant amount of money on items such as clothes, electronics, and jewellery. Below we have explained how to use this holiday to your advantage.
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Black Friday is one of the biggest shopping events of the year. Some deals on this day can save UK consumers a significant amount of money on items such as clothes, electronics, and jewellery. Below we have explained how to use this holiday to your advantage.
Black Friday is one of the biggest shopping events of the year. Our guide explains how you can plan and budget for it.
This guide reveals which brands operate under which banking licence, helping savers work out to what degree their savings are protected by the FSCS.
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