It’s a small world – and it’s even smaller when you deal with foreign currency. Whether you’re planning a post-lockdown trip to Asia, shopping at an online store in the Americas, or converting your rands to euros, here are a few things you’ll need to know about foreign exchange.
Money, after all, makes the world go round – but forex shouldn’t get your head in a spin.
1. Don’t convert in your head
This applies whether you’re buying forex via your smartphone in Joburg, picking up a pair of shoes on sale in Dubai, or buying a book off Amazon’s UK store. You may think you know the current exchange rate (“It’s – what? – 18 to the pound now, right?”), but you may be guessing (it’s been well over 20 to the pound this whole year).
Even if your mental arithmetic gets you close-ish to the right amount, you might be missing an intraday spike, or your mathematics times tables skills could simply be rusty.
Currency converters or all-in-one forex apps like Shyft give you accurate exchange rates, helping you ensure that you get what you think you’re getting at the price you think you’re paying. What’s especially handy about Shyft is that while it’s powered by Standard Bank, you don’t need a Standard Bank account to use it for buying, sending and storing forex. You can even use it to shop safely through international stores by creating 50 virtual cards for each currency pocket. Genius.
2. Mind the weather
New York in the Autumn. Cape Town in the Summer. Tokyo in the Spring. Just like every major city has its favourite season, global currencies are seasonal, too. It may seem strange if you’re the type of person who focuses on hourly intraday foreign exchange charts, but it’s true. Currencies tend to be stronger/weaker in some months than in others – and even though you’re not a licensed forex trader, as a global citizen it’s useful to know the best time to move your foreign currency around.
The Australian dollar (AUD) has a habit of losing value to the US dollar (USD) at certain times of the year, and the USD often does well at times when the euro (EUR) or British pound (GBP) may not. There are various macroeconomic reasons for this, and while some are predictable, others aren’t. It is useful to look at currencies trends over time and identify the peaks and valleys. Keep this in mind when you buy back rands with your forex on Shyft (yes, you can do that now).
3. Carry cash or a card
OK, so nobody’s really travelling right now due to various local lockdowns and the not-insignificant matter of a global pandemic. But that doesn’t mean you’re not already planning your next overseas trip. Whether you’re looking at the UK (to see friends), Vietnam (for the fresh air and green grass), Morocco (to escape the crowds) or Cuba (because… Cuba), do yourself a favour and plan to carry local bank notes and a currency wallet.
Here’s why: the exchange rate at foreign ATMs is never the actual exchange rate because it’s often padded with extra fees, and sometimes a currency conversion will be requested even if you’re transacting in the local currency. Pop-up ATMs at tourist hotspots are notorious for astronomically high conversion rates. We don’t particularly want to go all the way to London/Hanoi/Fes/Havana just to make some banker rich!
4. The world is your shopping mall
Lockdown may be lifting, but do you really want to risk the crowds at a local shopping mall? Online shopping came into its own during the Covid-19 crisis, and the beauty of it is that you’re not limited by geography. If an e-tailer ships to South Africa (and most of them do), then why not see what deals they’re offering? A Shyft virtual card can be used locally or internationally, and it operates just like any other credit card – just with USD, AUD, GBP and EUR, in addition to your trusty ZAR.
Two warnings, though. Certain goods (clothing especially) are heavily taxed, so the import duties could turn a ZAR100 T-shirt into a ZAR150 rip-off pretty quickly. Then, “standard shipping” from international online stores usually involves the postal service, which may be subject to regional lockdown restrictions and long delays. Use a courier instead for fast, safe and traceable delivery.
5. Know your limit
Before you start raining dollar bills, you need to know about the South African Reserve Bank’s single discretionary allowance (SDA). The SDA is an exchange control regulation that limits South African residents with a valid South African ID to a total of R1-million for “offshore activities” each calendar year. This applies to all your forex transactions, and it’s your responsibility to make sure you stay within that limit.
But – and here’s something you might not know – you have until December every year to get as close as you like to that R1-million limit.