When transferring money abroad, it can be difficult to know where to begin with so many companies vying for your business. In this section, we look at the various options available, such as banks, high-street providers and online brokers. We will also consider the different payment options available and how you can gain the best value from your transfer. Safety considerations will also be covered to help you select the most secure methods to transfer your money. Whether you are an individual wishing to send money to family and friends overseas, or a business needing to send funds to a client, our guide will ensure you get the best deal possible.
The most common methods used to transfer money are banks, high-street transfer services, and specialist online money transfer brokers. While banks or building societies often first spring to mind, they tend to charge high exchange rates and processing fees. If you are sending a large amount of cash, this can become highly expensive. Just consider spending £50 for every £1000 sent overseas!
An alternative approach is to use an online broker to gain lower exchange rates and minimise associated transfer fees. A major benefit of online providers is that you can compare and contrast all features at a glance, helping you to gain the best deal for your circumstances.
Online FCA regulated brokers often charge lower exchange rates than a typical bank and usually have zero fee, helping your money go further. The downside is you will have to complete a short online registration, but since this only takes minutes, the process is well worth considering. And once your account is set up, you will be able to send additional money on demand, whenever you see the need.
When you send money abroad using an online broker, providers tend to use two methods to charge you: a transfer fee and the exchange rate. These can be applied to both the sender and recipient.
Since many online brokers charge zero transfer fees, they will usually adjust the exchange rate to take this into account. However, if there is a transfer fee, it will likely be much cheaper than your bank or building society, and the exchange rate will usually be more favourable, too.
As such, our table is an invaluable tool for this important purchase decision. By comparing the exchange rate, transfer fee (if any) and any other associated features or costs, you will be able to come to an educated decision quickly and easily.
The level of security for your deposited funds can vary from broker to broker. While the security of transferred money has improved in recent years, it is still not quite as secure as the funds deposited in your bank account. That said, you should be aware of two main levels of security for your money:
- FCA regulated - Brokers displayed in our table are regulated by the Financial Conduct Authority (FCA). This means they must ringfence your funds. In the event the company goes bust, you will not lose your money.
- Registered brokers - Brokers who are simply “registered” don’t offer this level of protection and should be considered a higher risk than FCA regulated providers.
Exchange rates vary throughout the day, so depending on when you purchase, the rate will differ. If time is the limiting factor, a one off purchase may be suitable, but this may not guarantee the best exchange rate. There are a number of alternative options you can take to secure the most suitable deal, and the choice will depend on a number of factors. These options include:
- Forward contract - This method is where you agree a fixed exchange rate and then transfer your money when the rate reaches that point (generally up to 2 years). Fixed date forwards are where you transfer your funds on a certain day, when the rate is at your desired level. Open Forwards are where you transfer your funds at any date within the future at an exchange rate that you define.
- Spot contract - A spot contract is recommended for one-off payments. You can keep a close eye on the exchange rate, then take advantage of a favourable rate at a time that suits you. This method is often used for when time is restricted and funds need to be transferred as quickly as possible.
Plan ahead with:
- Limit orders - A limit order is an option to take when you have time to spare and want to achieve a particular rate. You set a price that you are willing to pay, then wait until the market reaches that price value. A spot contract is then made to finalise the transaction.
- Stop loss orders - Stop loss orders are useful since you have the ability to set the upper and lower limits for the exchange rate. This means that if you have time on your hands, you can wait until the best rate is available to you.