Sending money abroad? Time to ditch your bank

If you’re an expat who uses your bank to transfer money abroad, you’ll know that extortionate fees and bad exchange rates can leave a big hole in your pocket. Using a currency specialist can cut these costs dramatically. Here is how.

Published: Fri 2 Dec 2011 11:00 CEST
Sending money abroad? Time to ditch your bank
Photo: File

Currency fluctuation might sound like something that is only a problem for a handful of foreign exchange traders, but in today’s global economy the swinging value of the pound against the dollar, euro and other denominations is an issue for everyone.

Whether you’re working on temporary secondment overseas or you’ve relocated permanently, how you deal with transferring your money can make the difference between being euro wise and dollar foolish.

For most expats their bank is their first port of call when making international money transfers. It’s natural to assume that it’s their best option for handling accounts in different currencies. However, regardless of where you live in the world and what types of bank accounts you have set up, most banks offer poor exchange rates and levy a variety of hidden charges. At the end of the day they know that very few of their expat customers bother to check the rates and how much they’re paying. As a result they take advantage of a captive expat market and continue to cash in on our lethargy. 

But it doesn’t have to be this way and it pays to shop around for the best deal. 

Now, currency specialists HiFX have create this simple expat guide to international payments. This simple step-by-step guide gives you all the information you need to understand how to get the most out of your money transfers, because if you don’t do your homework, you could end up losing large amounts of money in hidden fees and poor exchange rates.

Beware hidden charges

When making international payments, the costs fall into two simple areas: fees and the exchange rate. When shopping around and comparing one company to another, regardless of whether it’s your high street bank or one of the many currency specialists in the UK, it’s important to pay attention to both. 

The key charges to look out for include transfer charges and overseas bank receiving fees. 

Exchange rates:
Many banks claim to be ‘commission free’ then load the exchange rate. It’s also difficult to get hold of the exact rate and compare it, and some providers simply don’t provide the information. 

Getting the most for your money actually boils down to a very simple question… 
“How many Euros/ Dollars/ Swiss Francs/Pounds etc. will I receive for my money, after all charges?”

To help you benchmark the exchange rate go to the HiFX currency converter to check out the interbank exchange rate. This is the rate at which banks and brokers buy and sell money to each other. Private individuals and small to medium sized businesses cannot access these rates but they are a benchmark and are therefore provided for indicative purposes only.

Remember exchange rates often change by the minute, so to compare providers properly you need to do your comparisons in one go. 

How are exchange rates calculated?

The rate you are offered will be dependent upon a number of factors including: 

- The amount of money you are transferring 
- The timeframes you are working to (i.e. whether you are looking to lock into an exchange rate for up to 12 months). 
- The currencies you are buying and selling and the volatility of those currencies 
- The exchange rate levels at the time of purchase 

How to find the best deal

For larger bank to bank international money transfers i.e. £250 and over, it pays to compare your high street bank’s exchange rates with those offered by some of the many currency specialists that exist within the UK. 

Typical reasons for making international transfers include: 
- Large purchases abroad such as stocks and shares, property, boats, cars etc. 
- Regular transfers, pension transfers, overseas mortgage payments, salary transfers etc. 
- Smaller one-off transfers, topping up an overseas bank account, transfers to family etc

How much will I save if I use a currency broker rather than my bank?

On average the amount saved by using a currency specialist rather than your bank will be between 2-4%.  So on £100,000 this equates to a saving of £4,000 on the exchange rate alone. 

It’s also worth remembering that due to their branch networks the high street banks have to set their exchange rates once or twice a day.  To make sure they remain profitable they have to increase the spreads to allow for intra day exchange rate volatility.  Brokers give clients access to live rates, saving you money.

How much quicker is it to use a currency specialist?

By using a currency company you’ll avoid international banking fees, which vary from bank to bank, and your money will get there a lot faster.  

For example a priority payment with Barclays costs £40 and takes 1-3 days. Standard payment costs with Barclays are £25 and takes 3-5 days. With Natwest £20 is the standard transfer fee (3-5 days) although there is an urgent service which costs £27and takes 1-3 days.  If making regular transfers to pay off a foreign mortgage for example or for salary transfers, the small additional fees can quickly add up to another £400-500 a year.  

By using a currency broker the transfers will in most cases be free and the money will be transferred either same day within 1-2 working days, depending on where you’re sending the money.

Timing can mean everything!
Depending on the amount you’re sending, the timing of a transaction can also be important particularly if you’re sending larger amounts.  

In many cases, people don’t pay much attention to what’s happening to the exchange rate and simply leave their decision to make the international money transfer to the last minute hoping for a good rate, assuming, that without all the funds available, there isn’t much they can do. 

Regardless of why you’re transferring your money, the larger the amount you’re looking to move overseas, the more important it is to maximise the timing of your transaction and minimise the risk that the exchange rate could get worse and make your money worth less. Remember, as soon as you decide to move overseas or buy and sell an asset abroad such as a property, you are exposed to adverse moves in the currency market. 

How to choose a currency specialist

Its important that you undertake the following checks when choosing a currency specialist: 
• How long have they been in business? 
• Are they authorised by the Financial Services Authority (FSA) under the Payment Services Regulations 2009? Companies that are authorised by the FSA have had to meet strict capital adequacy and business practice rules, comply with Payment Services Regulations and the FSA’s Conduct of Business requirements. 
• Are they registered with HM Customs as an overseas money service business? 
• Do they hold your money in segregated client trust accounts? (your funds are held separately from company funds protecting it from creditors). 
• Do they have audited accounts on their website and how strong is the company’s balance sheet? 
• Do they have professional indemnity insurance protecting customers from staff fraud etc. 
• How many staff do they have and what is their turnover? (Obviously a large established company is more reliable than two guys in a back room, though it’s no guarantee). 
• Do they have direct access to SWIFT? SWIFT is the world’s largest payments and settlements network for domestic and international trades. Direct access ensures you, the client, benefit from faster payments and enhanced security.


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