XEtrade performs the conversion at the rate I agreed to on XEtrade's website, at no extra charge. United Kingdom pounds become US dollars. From there, the funds in dollars arrive at a New York bank and are wired locally to my bank. From my US bank's perspective, a domestic wire in US dollars has arrived, and so I am not charged the higher foreign wire transfer fees, nor subjected to their draconian currency conversion rates or their iffy foreign exchanges services. I've saved high fees at both ends of the transaction, in addition to receiving a far better exchange rate. I've also simplified the transaction for both the sending and receiving banks, reducing the probability of errors.

If you are not in a big hurry and don't mind waiting a few extra days, the entire process can be virtually fee-less. Just today I purchased some books for our store inventory from a foreign supplier. It is simpler and much less expensive to offer a supplier payment in their own currency, as I did in this case using a bank draft.

I set up my USA account as an EFT account through XEtrade and let them draw the funds direct after an online trade is made. Once they have the dollars they convert to the foreign funds, at the agreed-upon rate, and then they create a bank draft in the foreign currency (in this case, Canadian dollars) which they send to my vendor. I am able to perform this function entirely online and during off-hours. I send an email to my vendor letting them know how I am planning to pay. There is no extra charge for EFT draws or bank drafts, and XEtrade guarantees that they are giving me the best exchange rate.

The reason they can do this, Steven Dengler explained, is that my small transaction is aggregated with those of many other large companies. Therefore instead of getting the take-it-or-leave it bank rate, or the credit card rate, or the let's throw a dart at the dartboard rate, I receive the service very competitively, without the rip-off fees. And, what's more, I can do all of this at my convenience, on my computer, at any time.

I can set up any vendor that I do business with in this way, so that future transactions are quick, and I can use multiple funding sources -- thus far, our US- and UK-based banks. As we expand to other countries, I expect that we will add other bank accounts and other vendors as well.

I should also quickly mention that XEtrade solves the forward transaction problem -- how do you guarantee an exchange rate with a certain, future sale that will take place during an indeterminate period. The answer is to create a similar transaction, but this time with a 30-day (or even a year!) period, guaranteed at the quoted rate.