There is perhaps nothing more universal than money. No matter where you are from or what language you speak, your concept of money is the same as everyone else’s. That is how we are able to live in a world with a global economy. We all implicitly agree that money is worth something (and everything is worth a certain amount of money).
However, as globalized as our world is, we still use different currencies in different countries. While Europe has managed to create a joint currency – the Euro – just about every non-European country has its own currency. The value of the currency can give you an idea of the state of a country’s economy, and you can make some money by trading currencies. However, aside from that, the multitude of currencies causes a lot of confusion, both on a financial level and a language level.
Trying to get a grip on the currency of a country you don’t live in is like trying to learn the slang words in a language you don’t know. That said, it is important to have a basic understanding of currency terminology around the world, especially if you are working in a global context.
Here are some of the confusing currency terms you need to know.
Currency Nicknames
It’s hard enough remembering what each currency is called. The fact that some of them have nicknames seems unnecessarily complicated. Fortunately, not all nicknames are used all that often in casual conversation. There are only a few that you really need to know.
Sterling: The UK already complicates the currency world by using a non-euro currency. Even before Brexit, the UK had stuck with the pound rather than switching to the euro. You’ve probably heard people refer to the pound as the pound sterling. Sterling is the name of the silver coins used in the Middle Ages. A pound is the number of silver sterlings that weigh a pound. This is why the pound is often referred to as the pound sterling, or even just sterling.
The Greenback: America is not the only country that uses green notes. However, Americans do tend to think of themselves outside of context sometimes. This is why they call the dollar the greenback, terminology which is often used in economic parlance around the world.
Loonie: Canada’s dollar coin has a picture of a bird called a loon on one side. As such, the Canadian dollar is sometimes referred to as a loonie.
Swissy: The Swiss franc is another currency that remained even as the rest of Europe switched to the euro. It is called the Swissy by some.
Currency Exchange Terms
Currency is most confusing when you need to exchange one for another. Most currencies are constantly in flux when it comes to their values in other currencies. These values are influenced by the economies in each country, world events, and instability.
There are different reasons why people exchange currency. As such, terminology differs as well, and it is important to know the difference. When would you go to a foreign currency broker? When should you go to a Forex broker instead?
Foreign currency broker
A foreign currency broker is a service that converts your money from one currency to another. For example, you may have earned money in US dollars but live in the UK. In order to use your earnings, you need to convert your money to British pounds. A foreign currency broker does this for you.
Foreign currency exchange is a lot more streamlined than it once was. A foreign currency broker can refer to a money transfer service that finds you the best rates at which to transfer your currency. They charge much lower fees than the banks do.
There are dozens of currency brokers headquartered in the United Kingdom. Far more so than you find in the US, where regulations are more complicated.
Forex broker
A Forex broker, on the other hand, exists for an entirely different reason. Because currency values are always in flux, savvy traders can buy currency at one value and sell it when its value grows. This is called Forex trading.
A Forex broker is a person or service that facilitates this process. It gives a trader the option to buy and sell different currencies, with various features to help make those trades worthwhile.
Whereas a foreign exchange broker facilitates money transfers, Forex brokers facilitate speculative trading for individuals who want to try their hand at making some money.
Currency Transfer Terms
There is also specific terminology used when exchanging currencies. These terms help you understand the cost of different currencies, as well as what kind of service a foreign exchange broker is giving you.
Mid-market rate
The mid-market rate or interbank rate is the midpoint between the buy and sell prices of any two currencies. This is the exchange rate you should try to get when you are exchanging currencies.
Most banks will give you an exchange rate significantly worse than the mid-market rate, while money transfer companies will give you a much closer value.
Multi-currency account
A multi-currency account is a bank account that allows you to receive money in many different currencies without having to convert each transfer to one currency. It is useful for companies and individuals who are selling or doing business in multiple currencies.
Instead of getting haphazard exchange rates and paying multiple fees, a multi-currency account holds all transactions in all currencies until you are ready to transfer them at the best possible rate with the lowest fees.
Currency Terminology
Currency terminology is, by its very nature, global. While every country has different terms that they use when discussing their currency, there are also international standards and unwritten rules by which currencies are described.
Knowing the nicknames of the different currencies, as well as the differences between various kinds of currency exchange services is important if you are making money overseas or living abroad and using bank accounts back home.
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