Fixing the Swiss franc exchange rate: a false economy?
Are you a cross-border worker commuting between France and Switzerland, or an expatriate living in Switzerland? To transfer your Swiss salary back to France, you need to take into account the exchange rate, which fluctuates daily.
Did you know that some banks offer the option to fix the exchange rate? This allows you to benefit from a favourable rate for longer and means you no longer have to worry about fluctuations in the Swiss franc exchange rate. But is fixing the exchange rate a good idea? b-sharpe explains everything in this article!
The exchange rate of the Swiss franc
What is the exchange rate for the Swiss franc? As you are no doubt aware, exchange rates – including that of the Swiss franc – are constantly changing. They fluctuate on a daily basis on the Forex market. There are many factors that cause the Swiss franc, and all other currencies, to fluctuate:
- The specified period
- The economic climate
- Monetary policy pursued by central banks
- Investor reaction
- The price of energy resources…
But how can you tell whether an exchange rate is favourable or not? To find out whether the exchange rate you’ve been offered is favourable – and thus determine whether the margin charged by your financial intermediary is too high – you can compare it to the reference rate (or ‘interbank rate’). This is the rate at which banks trade with one another. You can find it on all financial data websites.
With innovative financial intermediaries, you can exchange currencies online and benefit from competitive exchange rates compared to those offered by traditional providers such as banks or currency exchange bureaux.
How to lock in the Swiss franc exchange rate: the forward contract
For all your financial transactions between France and Switzerland (transferring your salary, making bank transfers, etc.), you need to take the exchange rate into account and find the best time to make your transfers, so as not to lose out on the exchange rate. Some people have decided to opt for a fixed exchange rate. This is known as a forward sale.
What exactly is a futures contract?
A forward sale is a contract entered into between an individual and a bank. It allows the exchange rate to be fixed at a rate that will apply to all currency conversions for a specified period. This period is usually set at 3, 6 or 12 months. Thus, when converting Swiss francs into euros, a forward sale commits the customer to selling a certain amount of Swiss francs to their bank each month in exchange for a certain amount of euros, at the rate specified in the contract.
Fixing your Swiss exchange rate: pros and cons
At first glance, fixing the exchange rate seems very advantageous. In particular, it allows you to benefit from a favourable rate for longer and means you no longer have to worry about fluctuations in the Swiss franc exchange rate. For an individual, this therefore provides protection against any unfavourable changes in the exchange rate. They no longer need to monitor exchange rates or look for the best time to carry out their transactions, as their bank handles the conversion.
However, this process has undeniable drawbacks. Firstly, the individual agrees a rate with their bank and will therefore be unable to benefit from a more favourable rate should market conditions improve. Furthermore, fixing the rate comes at a cost: the bank charges an administration fee and applies a margin on transactions that can sometimes be substantial. Finally, the bank may charge fees and penalties if you do not pay your salary into the account by the agreed deadline. With a forward sale, the customer is contractually obliged to make monthly payments to their bank. However, if life’s uncertainties (financial difficulties, unexpected expenses, redundancy) prevent them from paying the amounts due, the bank may claim penalty charges. Fixing the exchange rate therefore presents a financial risk that should not be overlooked.
b-sharpe, an alternative to exchange rate pegging in Switzerland
Fortunately, there are other ways to take advantage of a favourable exchange rate for all your currency conversions without having to lock in a rate (or use forward sales). b-sharpe, an online currency converter, offers you a cost-effective, user-friendly, fast and secure solution for all your currency exchanges, with reduced exchange fees.
A reliable and secure online currency converter
b-sharpe customers can lock in their exchange rate in real time and have 48 hours to complete their transaction.
Monitor rates with alerts
With b-sharpe, receive alerts when your currencies reach your desired exchange rate, and track the movements of more than 20 currencies. Set up exchange rate alerts in your customer portal and be notified at the best time to carry out your transactions.
How does b-sharpe’s CHF/EUR currency exchange service work?
The b-sharpe currency converter stands out for its ease of use! It takes just three steps to convert your Swiss francs into euros.
- Set up the transaction in your b-sharpe customer portal: provide details of your transaction and specify the amount you wish to exchange in the target currency, as well as the account into which the funds will be paid.
- Sending funds to b-sharpe from your bank account: using your banking app, make a bank transfer to b-sharpe’s IBAN, which you can download from your customer portal or find in your exchange confirmation
- b-sharpe processes the transfer in the target currency: as soon as we receive your funds, they will be converted and sent to the recipient’s account!
With an innovative, 100% online service, b-sharpe is your go-to partner for all your euro-to-Swiss franc transactions or dollar-to-Swiss franc conversions.
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