What is the cheapest method when sending money abroad?

Jane Wardle

Written by Jane Wardle on February 20, 2019

Updated May 14, 2019

money abroad

Thanks to new technologies, the traditional methods of sending money abroad are no longer the only ones available. Consumers now have access to a range of options, including those with low (or no) fees and charges, making it cheap and easy to send your money abroad. Which, though, is the cheapest option, and the best option for you?

In part, this depends on how much money you are looking to send, and where you’re looking to send it.

Banks and building societies

It’s unlikely banks and building societies will ever be the cheapest option when it comes to sending money abroad, though just how much you’ll pay in fees and charges will depend on who your account is with.

When you transfer your money through a bank, you’ll generally be charged a transfer fee, a fee for exchanging your money to another currency, and fees by the bank receiving the funds. How much this costs you can range anywhere from a few pounds to around £30-£40, and this is before you consider you’re probably not getting the best available exchange rate.

If you’re making regular overseas transfers, and these are going to the same country, it might be worth setting up a local account through your UK bank. This could save you money on fees. However, you can only do this is your bank has branches in the country your transferring money to.

Foreign Exchange (FX) Brokers

If you are looking to transfer over £3,000, FX brokers could well be your cheapest option as they don’t charge any fees over this amount and they generally offer some of the best exchange rates available. Like a bank, you’ll need an account before you can send money, which can take several days to set up. However, once you do, you can transfer money the same day.

FX brokers can be costly if you are sending less than £3,000 so check their fees if this is your plan. If you think you’ll be sending money regularly, and it will total over £3,000 in the end, it might be worth transferring all the money at the same time to save on fees.

Money transfer companies

Money transfer companies such as MoneyGram and Western Union can be found on most UK high streets as well as online. Unlike banks, you won’t need an account in order to transfer money. Like banks, they can cost you a lot in fees. For example, sending £100 cash through Western Union will cost you £2.90, which increases to £4.90 if you pay through your debit card, credit card or bank transfer. Fees increase the more money you spend.

Fees between money transfer companies varies significantly so you will need to shop around to get the best deal. When you do, look at which option offers the best value for money; Western Union currently waives fees for transfers between bank accounts for example.

Online Payment Systems

If you want to transfer money quickly, online payment systems are a good, affordable option, though – like money transfer companies – fees can vary considerably, so it pays to shop around. Generally, though, they are lower than banks and money transfer companies. PayPal is probably the best-known example of an online payment system. You’ll need to set up an account but, once you do, you’ll be able to send money to anyone with an email address or mobile phone number. A nice feature of these sites is that most let you see just how much foreign currency your pounds are worth and how much sending money will cost you.

Online payment systems work best for smaller payments as many works on algorithms that flag larger payments as suspicious, freezing your account until you provide evidence that you aren’t looking to launder money etc.

Peer-to-Peer Money Transfer Providers

Peer-to-peer money transfer companies, such as Transferwise and CurrencyFair, allow people to trade currencies directly with each other, reducing any fees you pay. Most charge a % of the money you’re looking to transfer based on where you’re sending money; Transferwise charges 0.5% to send money to the EU or US, for example, but 1.5% to Vietnam.

As with online payment systems you’ll need to register an account linked to your bank or credit card. Once you do, however, transfers are almost instantaneous.

Not all currencies are available through peer-to-peer money transfer companies so check whether the country you’re looking to transfer money to is covered before opening an account.

Considerations

While getting the best price for your transfer is important, there are other factors to consider when you plan on sending money abroad. You also need to think about:

  • How safe your money is: Banks are protected by the Financial Services Compensation Scheme (FSCS), but FX brokers and other money transfer companies aren’t, which means if they go out of business, your money is at risk.

You can mitigate these risks by choosing a company authorised by the Financial Conduct Authority or the Financial Crimes Enforcement Network if they are based in the US.

  • Customer service: If something goes wrong, you’ll want to be able to speak to someone quickly. With a bank or high street money transfer company, you have somewhere you can go to do this. With online services, you have to rely on getting hold of someone on the phone or contacting them via email.

Not all online sites offer 24-hour telephone support; check the one you’re using does so you know you’ll be able to speak to a real person if you need to.

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