What is the exchange rate margin, or “spread”?

Written by Team Future Forex - Written by Joshua Kotlowitz (CTO at Future Forex) - May 12, 2023 Written By Harry Scherzer (CEO at Future Forex) - as published on Ventureburn - July 24, 2023 Written by Joshua Kotlowitz (CTO at Future Forex) - as published on IT News Africa - July 28, 2023 Written By Harry Scherzer (CEO at Future Forex) - as published on BusinessTech - August 11, 2023 Business Tech - May 17, 2023 Written By Harry Scherzer (CEO at Future Forex) - as published on Moneyweb - July 1, 2023 Written By Harry Scherzer (CEO at Future Forex) - as published on Cape Business News - July 3, 2023 - January 23, 2024

This refers to the percentage difference between a foreign currency’s buy and sell rate and is typically determined by the client’s transaction volumes. This difference is due to the cost of exchanging one currency for another.

To illustrate, let’s say you are sending R1 million to the USA and converting it to US dollars. If the spot rate is R18 to $1, the bank might charge you R18,36 per dollar bought. The spread is, therefore, R0.36 on each US dollar, or 2% of the transaction value. While R0.36 per dollar doesn’t seem significant, the cost of the transaction, excluding the SWIFT processing fee, is R20,000.

It is common practice in the forex industry, amongst our competitors, to hide the high spreads they are charging. We at Future Forex pride ourselves on complete transparency and consistency, especially concerning pricing. Future Forex can provide you with the most competitive “spread”, which we have negotiated through our strong partnership with Capitec Bank.

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