For those of us wanting to send money abroad, whether to buy a dream holiday home or to support expat relatives, there are a bewildering array of options.
It can be easy to get lost in the combination of upfront fees and different exchange rates making choosing the best option hard.
Broadly speaking, there are three options for sending cash abroad: a straightforward bank transfer, a high street transfer firm or a specialist foreign exchange broker.
Each option will suit different people depending on what level of protection they want, how soon they need the money to arrive and how much they want to pay. Costs will also differ depending on where in the world your money is being spirited off to.
A number of online options have emerged in the past few years which have levelled the playing field somewhat.
I value the safety of my money
For those who are cautious about losing their money should anything go wrong with the transfer – or if the transfer firm should go bust – then sending money with your bank or building society is by far the most reliable option.
While unlikely to be the cheapest in terms of fees, or to offer the best exchange rate, all deposits in a British bank are covered by the Financial Services Compensation Scheme up to a value of £85,000. This means that, should your bank go under, you would get your money back up to this limit.
Other options, like brokers or transfer firms, may offer some protection but will not be covered by this cast-iron guarantee.
However, in addition to any fees your bank might charge, the exchange rate will be set in-house and is unlikely to be the best available.
Therefore the cost of the transaction is likely to be high, and either you will pay more or the person receiving the money will not have as many dollars, euros, yen or whatever currency you are sending left as they would have had you used another method.
Some banks operate fee-free foreign transfers – HSBC’s Premier and Advance accounts for example – but usually both the sending and receiving party will have to hold the same account.
I want the money to arrive quickly
If speed is most important then you could still be best served by your bank. Many transfers today, even international ones, happen within hours – although some take as long as four to six days, according to the Money Advice Service.
Generally the best option for a speedy transfer will be a high-street transfer firm like Western Union or Moneygram. This will be easy to set up, often involving only one form, and transfer will be quick with the recipient usually able to collect the money instantly.
For small amounts though, the fees can be very high. For example, Western Union currently charges a fee of £20 for sending money to Tonga.
Another option is an online service like Transferwise. These often come with very small fees but some services can take a few days to process a transfer – others are instant. You will, of course, require an internet connection.
It’s also worth noting there are fewer protections available for people using these services – they are not covered by the FSCS.
All such services based in the UK need to be either “registered” or “authorised” by the Financial Conduct Authority. An authorised firm must keep your money separated from its own accounts, meaning should it go bust your money should be recoverable. Registered firms do not need to do this, which lessens the protection significantly.
You can check a firm’s status on the FCA website, although its absence from the list could mean it is regulated in another country.
I want to send large amounts
The larger the amount of money you want to send, the more likely it is you will be charged a poor rate by your bank or building society. The best option for sending sums greater than £3,000 abroad is likely to be a foreign exchange broker.
These firms, some examples of which are Caxton FX, FairFX, MoneyCorp and World First, will often charge no fees at all on sums above this level.
As they are specialists, these firms will usually be able to offer the best exchange rates available, but you will have to open an account, which could take as long as a few days.