If you’ve got a large payment coming up abroad – a deposit, a bill, a purchase – you’ve probably heard the term spot contract. It’s simpler than it sounds, and for many customers, it’s a straightforward way to transfer money abroad.
Here’s what you need to know about how they can help you transfer money abroad.
The rate you see today might not be there tomorrow
Exchange rates move around every day, and sometimes by more than you’d expect.
Say you’ve had an offer accepted on a property in Spain and need to pay a €10,000 reservation fee. A spot contract lets you act on today’s rate and get the funds there fast (typically within 2 working days, though timelines can vary depending on the destination.)
If you want to, a spot contract lets you act on today’s rate before it changes. It’s useful when you need to move money now, and want to know exactly what rate you’re getting.
So, what actually is a spot contract?
It’s simple: an agreement to exchange your currency now, at the current rate, and the funds move within X working days. The rate you’re quoted is the rate you get, so you know your cost before you confirm.
It’s a great option when:
- You need to send money quickly, like if you’ve got a deposit, a completion payment or a transfer with a deadline
- The rate has moved in your favour, and you want to make your payment before it moves back.
However it’s important to remember that exchange rates can move quickly, and the rate available at the time you trade may be better or worse than rates available at other times.
What if your transfer is a few months away?
A spot contract is made for exchanging now. If your payment date is further out, by a few weeks, months or even years, a forward contract may suit you better.
A forward contract lets you lock in today’s rate for a transfer that happens later, protecting you if the market were to move against you in the meantime. Your Lumon account manager can talk you through your options so you can decide what suits your situation.
How can you book a spot trade with Lumon?
With Lumon, it’s as simple as getting in touch with the team, and we’ll take it from there. Once you’re set up with an account, you can make spot payments via our secure, simple-to-use online portal.
This publication is provided for general information purposes only and does not constitute financial, legal, tax or other professional advice from Lumon, nor is it intended as a substitute for obtaining advice from appropriately qualified professional advisers. Foreign exchange services provided by Lumon are offered on an execution-only basis. Lumon makes no representations, warranties or guarantees, whether express or implied, as to the accuracy, completeness or timeliness of the content of this publication. Foreign exchange transactions involve risk. Currency movements and market volatility may affect costs, cash flow and financial outcomes. Lumon Pay Ltd, trading as Lumon, is authorised by the Financial Conduct Authority as an Electronic Money Institution (FRN: 902022). Lumon FX Europe Limited, trading as Lumon, is regulated by the Central Bank of Ireland (Reg No: 631617).
