Home » FINANCE » Methods of Foreign Exchange A to Z

Methods of Foreign Exchange A to Z

Are you struggling with searching Methods of Foreign exchange, What is Foreign exchange systems? Now You are in right place. due to the scarcity of gold and state restrictions, in one way or another, the currency of one country is usually called the foreign exchange system.

Therefore, an agreement is made between the importer and the exporter in advance on the means and method of payment of debts due to international trade, and the exchange is done accordingly.

Foreign Exchange

Foreign Exchange:

Foreign exchange can take place through any other internationally recognized means. Such as foreign exchange bills, foreign invoices, no certificates, traveler’s checks, traveler’s certificates, etc.

Discuss the different methods of foreign exchange:

1. Foreign bill of exchange:

Nowadays, settling foreign debts or exchanging foreign currency through a foreign exchange bill is considered a very popular method.

In this business, a foreign creditor prepares a bill of exchange with a debtor of another country, pays only the amount due on sight or payable on demand, or sends the bill to one of his banks in the debtor’s country.

The creditor’s bank then presents the bill of exchange to the debtor and the debtor pays the bill in its native currency.

2. Bank draft:

In the present era, a large amount of foreign debt is settled through bank draft. According to this method, the debtor deposits, all the debts to his bank in his native currency and the bank prepares a cover letter in favor of the foreign creditor concerned and sends it to a branch bank or a representative bank located in the creditor’s country.

The bank or representative bank, the northern branch of the creditor’s country, informs the creditor and the creditor comes to the bank and pays the debt in his native currency.

Again, the bank of the debtor’s country can send this order directly to the concerned. After receiving the letter of credit from the creditor bank, the debtor is paid in his native currency by presenting it to the branch bank or representative bank of the issuing bank mentioned in it.

3. Personal check:

At present, the currency is also exchanged through a personal check. In this method, the debtor issues a check in the name of the creditor on his bank and sends it to a foreign creditor. The creditor collects the required amount by depositing the check in the bank of his country, the branch of the issuing bank, or his representative bank.

4. Cash letter of credit:

It also sends money abroad through a cash certificate and collects the certificate on behalf of the creditor and sends it to the creditor. The creditor collects the money by depositing it in the bank of the country of credit or by depositing it in the branch of the issuing bank or its representative bank.

5. Traveler’s check:

Traveler’s check is also currently used to denominate foreign currency. In this method, a traveler collects the required amount by depositing a certain amount of money in his country bank and collects the required amount by presenting the check from the branch of the bank issuing the check or its counterpart bank in the countries to which the traveler travels.

6. Traveler’s letter of credit:

In this method also, in exchange for foreign currency, the person traveling abroad collects the certificate of travel by depositing money and fees in the domestic bank. The bank instructs the opaque branch or representative to send money to the specified person.

7. Cash paper currency:

Remittances and payments are also made through internationally recognized paper notes (such as dollars, pounds). With the proper approval of the government, the purchase-sale and transaction can be done by carrying the number of dollars and pounds abroad. Due to the 3 reasons for carrying cash, the exchange of currency is done in a limited way.

8. International money order:

In this method money is exchanged according to the agreement executed between the governments of the two countries. According to this method, the debtor pays the money to the foreign creditor or sends the money abroad through a money order.

9. Telegraphic transfer:

This is an excellent way to send money abroad quickly. According to this method, the debtor pays the full amount of his debt and the telegraph fee together in the local currency in his bank.

The bank of the debtor then instructs the bank or any of its representative banks in the country of the creditor to repay the said amount to the concerned creditor. Upon receipt of such instruction by telegram, the concerned branch bank or representative bank informs the creditor of the news and the creditor appears at the bank and is paid in his native currency.

In this way, the exchange of currency can be done quickly, But it is an airy method.

10. Transfer by mail:

According to this method, the debtor deposits all the money for his debt in his bank along with the required fee. The bank of the debtor then instructs the bank or any of its branch banks in the country of the creditor to pay a certain amount of money to the creditor concerned.

Since such instruction to pay money to the creditor is sent by post to the said branch bank or representative bank, this method is called the exchange of money by post.

11. Transfer by fax:

This is similar to sending money by post or wire. This type of remittance can be used to send quick news and pay directly to the bank’s fax number without the help of any service provider.

When the lender deposits the money along with the bank service fee, the Uttam Bank directs its overseas branch or representative bank to send the money by fax to the foreign recipient bank. However, the recipient can also withdraw money directly from the bank.

In that case, the recipient can withdraw cash by contacting the bank, collecting the Lopan code number from the sender, and proving himself as the real recipient.

12. Transferring by E-mail:

Like sending money by fax, you can send money abroad through an e-mail message. In this case, the sender’s bank sends an e-mail message to the rice bank or representative abroad to pay the recipient a certain amount.

Such messages are provided by the bank only when the sender pays the bank a certain amount of money including the commission for the purpose of sending the e-mail. In the case of cash collection, the recipient has to prove his authenticity by collecting a secret code number from the sender.

However, such proof is not required for money transfer through a LANC account. Sending money via e-mail is considered to be the most popular method in the current banking world.


The full form of ATM is Automated Teller Machine. which allows a customer to make financial transactions through the device without the assistance of any individual.

Customers use different types of ATM cards such as Visa cards, Master cards,s, etc. abroad. Can withdraw money while traveling or through ATMs located abroad.

14. SWIFD:

The full form of SWIFT is The Society for Worldwide Interbank Financial Tele. Communication. Banks of countries that are members of SWIFT can only use SWIFT’s network and conduct activities in collaboration with the customers.

This Swift code is used for exchanging messages with each other. Almost all banks in Bangladesh are covered by Muifat’s services. It is considered acceptable, but at present, it is also used in various electronic media Used in exchange for local currency.

Tag: theories of exchange rate, introduction to exchange rate, fixed exchange rate, foreign exchange investment, foreign exchange transaction, importance of foreign exchange, foreign exchange meaning, types of foreign exchange, methods of foreign exchange.



Foreign Exchange & Foreign Currency

Principles of Business Finance.

Importance of Business Finance.

Careers in finance,

What is the Science of Money,

History of Financial Management,

Nature of Financial Management,

Types of Pure Risk,

How to Avoid the Risk,

Importance of Risk Management,

Definition of a Risk,