Five ways to transfer money abroad
Today, in the first part of a two-part series, I'm going to look at five ways to transfer money abroad. Let's get started with the very cheapest way of doing it!
Currency Fair: there is no better way to transfer and exchange your pounds into a foreign account in another currency, although before you can do so you'll need an account in your name in both countries.
This is cheap because it's a peer-to-peer service, rather like Zopa, where individuals trade with each other. Cutting out the middleman saves at least £20 compared to the cheapest middlemen and a great deal more versus the banks.
I use Currency Fair almost every month to transfer £1,000-£5,000 into a euro account in Germany and the whole process takes just hours, although some banks might slow the process, taking a few days.
There is a £3 fee but the full price varies depending on the spread in the exchange rate. Put the fee and exchange rate together and it can cost up to £14 to transfer about £1,500 from a UK sterling account to a euro account on the continent, but it is often closer to £8.
On one occasion I paid just £1.80 in total, despite the fee being £3, because the exchange rate offered was actually better than the "real" interbank exchange rates.
The currencies you can transfer into include AED, AUD, CAD, CHF, DKK, EUR, HKD, HUF, NZD, PLN, SEK, SGD, USD and ZAR.
2. Get some help
Fxcompared or Compare Money Transfer Ltd are both online resources that show you the costs of various providers when sending money to dozens of different countries.
3. Bank international payment services
Since last looking at what transfer services my bank smile offered I have switched to Halifax to get a better current account deal. However, its international payment services look no cheaper.
Halifax claims to cost you just £9.50, but this is deeply disingenuous, since the bank will take a large extra slice of your cash by giving you a bad exchange rate, on top of that fee. What's worse, the bank doesn't even tell you what amount of currency you'll get until after the transfer has gone ahead, unless you call one of its long-winded automated lines first.
I would expect that a £1,500 transfer from Halifax and most other banks costs, with the exchange-rate spread and fees added together, something between £40 and £60 – or three to 33 times more than Currency Fair. This is typical for banks, although they can be even more expensive, as I have seen costs in excess of £120 before.
Halifax's fee is also £10 higher – so £19.50 – if you do the transfer by telephone or in branch instead of online.
4. Foreign drafts
I could also send payments through my bank by post using a foreign draft. This is even more expensive, because the fee alone – before Halifax takes tens of pounds more off you with a poor exchange rate – is £20.
5. Urgent bank transfers
According to NatWest, its fees for a same-day transfer are just under three times more expensive than same day. It charges £10 for an ordinary transfer, much like Halifax, but £27 for the quick delivery service. Factor in its exchange rates, and we're talking probably at least twice that in costs.
NatWest warns that the receiving bank will also charge for same-day and slower transfers. This does sometimes happen. With Currency Fair and other transfer services I have usually avoided it, however.
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