The problem with using a bank to transfer your money
When you send money abroad through your bank, you will almost always be charged an international money transfer fee, which can range between $10 and $30 depending on the bank. The currency in which your money is transmitted may impact your cost, and you may be charged an extra fee to expedite your transfer. However, the narrative does not finish there. If you send money through your bank, you will most likely pay a margin of up to 5% on the daily exchange rate. Ouch.
To trade money with one another, banks employ something called the interbank rate. This rate changes by the second, and it is the rate you will see if you conduct a simple Google search for ‘1 AUD to USD.’ However, it is not the rate that banks provide; they often add up to 5% to the daily exchange rate, so on a $10,000 transfer, you may be paying $500 in addition to the costs paid to send the money.
What exactly is an international money transfer, and how do they operate?
An international money transfer allows you to shift money from your account in the UK to one in another country, whether it’s to a family member living abroad or to pay the bills on foreign property.
However, it is not that straightforward — there are fees involved since the firm performing the transfer must earn a profit. The two costs are as follows:
- The cost (the obvious charge). A cost is payable for each transfer, which can be either a fixed price or a percentage of the transfer amount. Some suppliers will promote that they have no fees, but don’t fall for it. In that situation, the corporation will profit by providing you with a lower exchange rate.
- The rate of exchange (the hidden charge). It’s frequently tough to obtain and compare the precise cost because some suppliers don’t publicize prices – you typically have to contact or check in to learn the rate you may receive that day.
While the variety of fees and rates might be perplexing, you can quickly compare firms by asking one basic question: “After all costs, how many euros/en/dollars/etc would I get for my pound sterling?”
It may appear straightforward, yet getting an answer might be difficult at times. The exchange rate fluctuates throughout the day. To effectively compare suppliers, you must do so all at once. Once you’ve sent the money, it usually takes a few days for it to reach the receiver, but this varies depending on the method you select and the country to which you’re sending the money. You may choose quick transfers, but they normally come at a considerable fee.
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While the variety of fees and rates might be perplexing, you can make regular transfers to one location – free transfers via banks
A lot of institutions allow you to send money to affiliated banks overseas for free – albeit this is generally simply an overseas branch of the same banking company.
So, if you and the person to whom you wish to transfer money have the appropriate accounts, sending money through the bank may be the most cost-effective option. This is frequently the best choice for frequent money transfers to people in the same country, such as regular cash transfers to family members living overseas. The alternate option allows you to deposit funds into a foreign account in your name, making it more appropriate for payments on holiday properties abroad.
The first option is to make use of free international transfers. If you and your partner both have an HSBC account, the transfer service is free for Premier and Advance current account holders who use online banking to move money from one HSBC account to another (up to £50,000). If the receiver does not already have an HSBC account, the transfer will cost £4 (£9 if done over the phone).
It takes three business days to execute most transactions and accepts 200 locations and 60 currencies (see the full list). However, because HSBC’s exchange rates aren’t always the best, it’s always a good idea to double-check them. Consider the advantages and disadvantages of the international transfer companies listed below. Despite the cost, it’s feasible that they’ll getaway.
The second option is to save money by transferring money to a foreign bank account in your honor.
- Depending on your destination, such as India, you will almost probably need to create a UK and an international bank account. Create a State Bank of India UK Instant Access Savings Account and keep at least £500 in it to transfer funds to any Indian bank account.
- Among them are the United States, Hong Kong, and other nations. You should have a £75k pay plus an HSBC mortgage, life insurance, or protection product, or £50k in savings plus an HSBC mortgage, life insurance, or protection product, to qualify for HSBC’s Premier account.
- To the countries in the Nordic and Baltic regions. Danske Bank has branches in Northern Ireland as well as online banking, which allows transfers to any account in the Danske group, which includes Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Luxembourg, Norway, Poland, Russia, Sweden, and the United States.
Under £5,000 in one-time or sporadic transfers
Several companies in the United Kingdom specialize in international money transfers. This method is excellent for non-urgent transfers of lesser quantities of money, such as sending one-time cash to a friend or family member abroad (for example, Christmas gifts) or making payments for items received.
You pay them in sterling, which they convert and deliver to the recipient bank within two to four working days, generally by internet transfer. You must first create an account and get your address validated, which may take several days.
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Top transfer providers under £5,000 – our review
We’d start with Wise since it consistently receives good ratings and great feedback from people who have used it when we’ve checked. Despite the charges, we’ve found that the total amount of money you get for your money is still competitive.
However, fee-free firms like OFX, FairFX, and Currencies Direct, which provides newbies up to £200 in Amazon vouchers for transfers made through our link, are always worth considering. Azimo also provides newbies with two free transfers. Remember to receive quotes at the same time, and the amount of money you’ll get for your pound sterling after costs is what you’re wanting.
|Provider||Transfer fees? (i)||Newbie perks?||Currencies||How to contact|
|Wise*||Yes, 20p plus 0.35% of amount transferred (i)||N/A||55||Online|
|Currencies Direct*||None (min £100 transfer)||Free £20-£200 Amazon voucher on transfers of £2k+ made in first six months (ii)||28||Online|
|Azimo*||None for first two, then fees from £1 (i)||Newbies get two free transfers||60+||Online|
|FairFX*||None (min £100 transfer)||N/A||100+||Online/phone|
Sending greater quantities of money abroad (£5,000 or more)
Large transfers, such as purchasing or selling a home overseas, are best handled by specialized foreign currency brokers. There are several firms, and the same lack of security exists as previously – therefore double-check everything, since the amount you might lose could be substantial.
It’s also worth remembering that even modest differences in currency rates may make a big impact — a 1% rate increase on £100,000 is a £1,000 gain. As a result, getting the best rate becomes even more important. Because rates fluctuate often, acquire many bids at the same time. Here’s how to do it:
- The best exchange rate to use as a benchmark. To find the greatest deals, use our TravelMoneyMax tool. After all costs, this identifies the best rates for acquiring cash when traveling on vacation, so you should try to beat it.
- Request a quote from your bank. It’s uncommon for your bank to be the greatest purchase. It is, nevertheless, a helpful second benchmark. Some companies provide additional services to current clients, so it may be a win-win situation.
- Make a comparison to a specialized currency broker. These firms purchase and sell large amounts of foreign currency, allowing them to provide great exchange rates that are often within 1% of the interbank rate – the rate that banks use when borrowing from one another (banks are typically three percentage points worse than the interbank rate).
In addition, most brokers do not charge fees for sending money and will cover all receiving charges, leaving you with only the exchange rate margin to pay. It’s also worth contacting around to see if you can get a better rate; but, the more money you transfer, whether in one large sum or over time, the more leverage you’ll have in negotiations.
Our analysis of the best brokers for transfers over £5,000
We recommend obtaining quotations from all three brokers listed below to discover the best rate for your currency because there is no hard and fast rule about which is the best.
For transfers above £5,000, all of our top choices are fee-free, and they all provide potential benefits for newcomers, such as discounts. Currencies Direct is a fantastic place to begin because it charges the least for extra Amazon discounts.
Remember that while comparing, the quantity of money you get for each pound sterling is what is important, so don’t get sidetracked by freebies.
|Provider||Transfer fees?||Newbie perks?||Currencies||How to contact|
|Currencies Direct*||None (min £100 transfer)||Free £20-£200 Amazon voucher on transfers of £2k+ made in first six months (i)||28||Online (less than £25k) / phone (£25k+)|
|Global Reach*||None (min £3k transfer)||Free £40-£200 retail voucher on transfers of £10k+ made in first six months (ii)||38+||Online/phone|
|Moneycorp*||None via our link||£150 credit if making total transfers of £50k+ in first three months (iii)||30+||Online/phone|
Transfers are made instantly (last resort)
If you need to send money fast – or if the recipient doesn’t have a bank account in that nation – there are other options (for example, emergency funds for a traveler). These, however, are too expensive. How it works is as follows:
- Check to check if the money may be picked up from an agent or branch by the receiver. The two main operators, MoneyGram* and Western Union*, are both licensed by the Financial Conduct Authority, and there are others. Fees and rates differ based on the quantity and destination country, therefore compare both (if possible) to see which is least expensive. Fees usually vary from £1.90 to £4.90.
- Pay the money in person or online to your selected transfer firm. If you don’t want to make the transfer online, there are various money transfer agencies at newsagents, post offices, and banks around the UK.
- The recipient then receives it on the other end of the line from an agency. They merely need to accompany the transfer and pick it up after it is completed. In most circumstances, the recipient will be asked to identify themselves or, if that isn’t feasible, to provide a code (that you are given and pass on to them).
Top 9 Low-Cost Money Transfer Options
1. Your bank
A bank can assist you with a wide range of transactions. If you’re simply transferring cash from one account to another inside the same financial institution, your bank will do it for free. It may be conducted in person at a bank by transferring funds from one account to another, or it can be completed online.
Zelle, founded in 2017, is one of the most recent additions to the payment scene. The corporation, which is a digital payments network based in the United States, is owned by Early Warning Services, a private financial services firm. Users with funds in a U.S. bank account can enroll in the Zelle app or through their bank’s Zelle electronic portal with their email and a U.S. mobile phone number to have access to the service.
The sender then enters the recipient’s preferred mailing address and phone number in the United States, as well as the recipient’s US bank account. After the money is received, the recipient receives a message with instructions on how to complete the payment. Although there are no costs to send or receive money through Zelle, consumers’ banks or other financial institutions may charge them for using the service.
PayPal may be a cost-effective way to transfer funds. It enables consumers and organizations to electronically transfer payments from one PayPal account to another. Sending money via PayPal is free, however, the recipient will be charged a fee to cash the payment. The fee is 2.9 percent + $0.30 per transaction for transactions up to $3,000 dollars.
Fees for bigger transactions fall marginally, and there are no fees for transferring money to friends or family members if the money comes from a bank account. International transaction costs are typically roughly 1% higher, and you’ll be charged an exchange rate on transfers made in foreign currencies.
4. Western Union
Money transfer services to another city, state, or country are provided by Western Union and MoneyGram, two comparable companies. They charge a set cost for the transfer, which is determined by the speed of the transfer, the location of the receiver, and the amount being sent. You’ll be charged an exchange rate if you send money overseas or internationally. Because these money transfer businesses don’t always provide a competitive exchange rate, you’ll have to pay a hidden fee every time you send money overseas. However, one of the most important advantages of these services is that they are both dependable and convenient. Depending on the destination, Western Union’s rate markups range from less than 1% to over 6%. Fees for transactions of less than $1,000 are as low as $5.
OFX offers a fantastic online experience for money transfers, as well as exceptional customer support. Their currency transfers are quick and simple, they offer a higher exchange rate than banks, and most transactions arrive in one to two business days. Although you cannot pay for your transfer with a debit or credit card, their costs are quite cheap.
OFX does not charge any transfer fees, regardless of the amount of money sent. Exchange rate markups are often less than 1%, so you also enjoy attractive rates. OFX receives your bank transfer in one to two business days, depending on the destination, and distributes the funds to your receiver in another one to two days.
Wise (formerly TransferWise) is often recognized for fast international transfers and highly competitive exchange rates. It’s a great option if you want a hassle-free and low-cost way to send money overseas. They offer an easy-to-use online service and mobile app and are ideal for sorting out your international money transfer straight away.
XE has been in operation for over 25 years and does not impose a fixed fee for international money transfers. You are free to transfer as much or as little as you like, and XE benefits entirely on the exchange rate they offer you. They assist businesses and individuals, and they provide friendly and personable customer service.
8. Email Money Transfers
Some financial organizations, particularly some of Canada’s major banks, provide an email money transfer service. This type of money transfer works in the same way as an electronic check. Although the transaction is launched by email, and the receiver is alerted by email that the funds are available, the monies are not physically transmitted by email. Although a security question is usually necessary to identify the receiver before they may get the cash, you don’t need the recipient’s bank account number. Transferring cash by email money transfer is often only a few dollars, making it a cost-effective choice if it’s available to you. Receiving money using this technique is usually free. This service is also quite dependable and quick, requiring only a few days to reach the recipient’s account.
One of the most affordable solutions. Wise, previously TransferWise, offers some of the lowest exchange rates available when using a bank account, and upfront fees are often less than 1% of the transfer amount. However, if you’re shipping $10,000 or more, OFX may be a better option. Even though bank transactions might take days, same-day delivery is conceivable. A transfer made with a debit or credit card can arrive in minutes, but a transfer made using a bank account takes one to three business days on average, depending on the destination.
If you pay via wire transfer, you can send up to $1 million to Wise.
Sounds like your previous international money transfer had a ludicrous exchange rate, hidden fees, delays, and additional charges? As your money travels to a foreign country, banks may and will syphon off hundreds of dollars. It’s a bit of a charade, to be honest. If you transfer money internationally frequently and want to receive the best rate possible, you may sign up for several money transfer services and compete with them every time you make a transfer.
Sending money internationally used to be straightforward, with few options. The procedure has become more complicated as a result of the proliferation of possibilities. However, it also implies that you have the freedom to discover a solution that works for you. The best option will save you money, satisfy your requirements, and provide you with a piece of mind.
Also Read: The Best Money Transferring Apps in Australia