Converting one currency into another can be expensive, with fees for international bank transfers or poor exchange rates. Whether you’re looking to send money to children at university outside of the UK, or receiving cash in a foreign currency, there are some ways to cut the cost of international money transfers.
Cut out the banks
Banks tend to be the worst offenders for paying poor exchange rates or charging high fees, just for trying to exchange cash from one currency to another. By using your standard bank that you use for personal banking, you’re likely to get the worst deal. Paypal is also renowned for poor currency exchange rates, which can really dent your income if your moving money internationally.
Look at specialist currency brokers for larger amounts
In the last few years, dozens of currency brokers have cropped up to provide an alternative to the standard international money transfer services offered by banks. Not only are the fees generally around half that of the banks, but you’ll often get a better exchange rate which could help you to be between 5 and 8% better off.
A few of the larger ones worth mentioning are WorldFirst.com, MyCurrencyTransfer, HiFX and MoneyCorp
– all of which are foreign currency specialists. You can get an indication of the current exchange rate you’ll receive, together with the set fee charged per payment. All are free to sign up with so you can set up a quick account and get started within minutes. Essentially, the payment will be made to a dedicated bank account (along with a unique reference number), where it will be converted into the currency of your choice. It’s then possible to get the payment made back out in the desired currency made back out from the account. For example:
Payment made in US Dollars to dedicated account > Payment taken out of account in Pound Sterling, at your time of choice.
This means there are further benefits, such as getting expert advice on when to transfer the payment from one currency to another. For example, if the pound is currently week against the dollar and you’ve been paid in dollars, you may decide to leave the payment in dollars until the pound is stronger.
Are there any risks with currency brokers?
Make sure that the company is authorised by the FSA (Financial Services Authority), which will ensure your money is protected while in transit if the firm was to go bust. Each day the company is required to place your money separately from the it’s own accounts, which is known as ‘safeguarding’ – if a company isn’t authorised, then your money won’t be protected.
Use specialised online international money transfer services for one-off payments
Specialist currency brokers will generally deal with regular or large payments (going into the thousands rather than hundreds). This makes them ideal for buying property internationally or for regular payments to family members abroad, as there’s the flexibility to decide at what exchange rate you’d like the currency converted.
For smaller, one-off payments though this often doesn’t apply as you just need to get the payment made or get one received into your account. There’s a huge amount of online services that offer a turnaround time of around 2-4 days. A few of the larger ones include FairFX
and Post Office. They’re extremely easy to use as you just need to make the payment online in sterling, which they’ll then convert and send to the recipient. The difference here compared to the currency broker option is that they convert the money immediately, rather than advising on the best time.
Are there any risks with online money transfer services?
Like the currency brokers, you should identify the ones that are authorised by the FSA so that your money is protected if anything happens to the firm.
Thresholds for getting the best international money transfer rates
If you’re looking to send regular payments abroad, you may actually be worse off than sending one or two larger ones. This is because you’ll often benefit from better currency exchange rates the more you transfer. These are known as ‘thresholds’ and tend to be set at the following levels: £0-£4,999, £5,000-£14,999, £15,000 - £99,999 and £100,000 plus.
Check the thresholds at each of the foreign currency transfer companies as they do differ slightly. You may then decide to adjust how much money to transfer each time so that you get the best exchange rate possible, cutting the cost of the transfer.