Skip to main content

Guide to transferring money abroad

There are many instances when it may become necessary to send money abroad. You might need to pay for the purchase of a property overseas or simply need to put down a deposit on a holiday rental.

Whatever the reason for your transfer, no-one wants to end up paying too much for the transaction and miss out on the best possible exchange rate.

How Money transfers are calculated

To calculate the cheapest way to send money abroad three variables come into play: exchange rate, commission and fees.

It goes without saying that the best way to transfer money is to calculate the exchange rate, add commission and fees and see which service will ensure that the largest possible amount of currency is paid into the foreign account.

Other factors you could consider are the ease of use and speed of transfer, but thanks to a highly competitive market, most services are now offering a similar standard and speed of service.

Keep in mind that the tariffs for quick transfers or so-called ‘instant transfer’ will come at a premium. It’s always best to plan any money transfer well in advance if you know a transaction is imminent.

What to look out for with money transfers

As a rule, avoid your bank. In one instance a bank charged £24 to send £100 abroad at a mediocre exchange rate. Although not all banks are that bad, banks will always charge too much for sending smaller amounts abroad.

The percentage fee to amount will drop off exponentially as the transfer amount grows, but banks are generally not good value when it comes to the business of foreign transfers.

The vast majority of bank transfers are fraught with hidden fees and offer poor exchange rates.

To find the best transfer deal, you need to employ the services of a money transfer firm or currency broker. There are literally hundreds of money transfer firms in the UK offering a wide range of services.

You will find them on the internet or classified ads in newspapers. Typically they will all make similar promises, which could include:

  • Highly competitive exchange rates
  • No international transfer fees
  • Zero commission
  • No hidden costs
  • 24 hours a day, 7 days a week service
  • Safe and secure transfers

Others firms may also offer instant cash paid into your recipient’s bank account, but this will come at either a fee or reduced exchange rate.

Generally it is easy to set up the transactions. In certain instances depending on the country you are sending the money to, you may be asked to declare the source of the funds and give details of the recipient. These are standard practices to prevent money laundering and tax evasion.

While the promise of ‘no transfer fees’ and ‘zero commission’ might look promising, these firms exist because they provide a service for profit. So expect to receive a less competitive exchange rate when the service fee is waived.

In many cases it might be more profitable to pay transfer fees for more favourable exchange rates. In general fees tend to be high for small amounts and taper off as the transfer amount grows.

The fact of the matter is that you will have to shop around for the best exchange rate at the lowest commission and/or fees for the amount you need to transfer.

Before you consider using a money transfer service, be sure that the firm is covered by a compensation scheme.

Should the firm lose your money during the transfer, you have the right to complain to the Financial Ombudsman Service who will investigate and order the company to repay your money.

Where to go for money transfers

There are lots of currency comparison websites out there, they are set up to find the best exchange rate for you and will pick up subtle differences in varying rates being influenced by factors such as your postcode and which day of the week you buy the currency.

For large amount transfers it might be worth contacting a currency broker or foreign exchange (FX) broker, even if it’s just to get a quote for comparison reasons. FX brokers are specialists in currency transactions.

They do not handle small transactions for free, but will handle transactions under £3,000 for a fee.

The downside is that you will need to open an account with the broker, which can take a couple of days. The upside is that you then have the freedom to wait for the best exchange rate on offer or opt for a ‘forward contract’ to lock-in a favourable exchange rate at a future date.

Most importantly, always ask for a complete breakdown of fees before you begin the process.