Thousands of us send money abroad every year. But the way we choose to do so may mean we end up spending far more than we should.
There are all sorts of reasons why you might send money overseas. Perhaps you have family abroad that you help financially. Or maybe you have bought a holiday home and need to send money to pay the mortgage. Or perhaps you are getting ready to emigrate.
Using banks for an international money transfer
The obvious option if you want to make an international money transfer is to head to your local bank. However, this can be a costly decision for a couple of reasons.
First is the exchange rate. Unfortunately banks aren't very good at offering competitive rates on your cash. Indeed, in some cases the best rates offered by banks are 3% less than those on offer from their broker competitors. That can make a big difference to how much cash you have at the end of the transfer.
One of the reasons the exchange rate offered by your bank may not be so good is tied into the second problem with going to your bank – the fees. Most banks levy an upfront fee of £10-£30 for the transfer, but they may also offer a substandard exchange rate in order to trumpet their services as 'commission-free'. So don't be duped!
Saving money with a broker
Chances are you'll be much better off going to a specialist broker. Moving money across countries is their business, so it's in their interest to offer a better service than you get from banks.
So not only do you get a better exchange rate, but the fees are much more palatable too. You can even lock in the rate on offer for a longer period, in some cases for up to two years. That's particularly useful if you're looking to buy a property overseas and sterling has hit a high point.
Some brokers will also allow you to set up a regular payment, just like a standing order, with no additional fees to worry about.
Let's take an example. I want to transfer £10,000 into US Dollars. First let's take a look at what I'd get from a handful of high street banks.
|
Bank |
Amount received |
Fees |
Effective exchange rate to the £1 |
Time taken to receive the money |
|
Lloyds Bank |
$15,812.90 |
£17.50 |
$1.5785 |
1-12 working days |
|
Royal Bank of Scotland |
$15,796.70 |
£30.00 |
$1.5749 |
1-2 working days |
|
NatWest |
$15,796.70 |
£30.00 |
$1.5749 |
1-2 working days |
|
HSBC |
$15,785.36 |
£4.00 |
$1.5779 |
1-6 working days |
|
Barclays |
$15,785.36 |
£40.00 |
$1.5722 |
1-8 working days |
Data correct as of 9/10/14
Source: lovemoney.com international money transfer comparison centre
Now let's take a look at what you would get with some of the UK's top brokers
|
Broker |
Amount received |
Fees |
Effective exchange rate to the £1 |
Time to taken to receive the money |
|
$16,069.51 |
£0.00 |
$1.6070 |
1-3 working days |
|
|
$16,058.17 |
£0.00 |
$1.6058 |
1-3 working days |
|
|
$15,939.91 |
£0.00 |
$1.5940 |
1-3 working days |
Data correct as of 9/10/14
Source: lovemoney.com international money transfer comparison centre
As you can see, you're looking at getting around $200 more by going with a specialist broker rather than a high street bank. You may also get your money quicker than with certain banks!
Just be aware that the brokers don't charge a fee in this example because of the amount of money being transferred. Smaller transfers may be subject to a fee.
How safe is my money?
There is no protection from the Financial Services Compensation Scheme when it comes to international money transfers, but that's not to say your money is completely unsafe.
If you use a firm that is authorised by the Financial Conduct Authority (FCA), it has to keep your cash separate from its own. That means that should the firm hit trouble, your money should get back to you.
All of the brokers listed in the above example are authorised by the FCA, but always check whether a broker is regulated before you use them.