You might assume transferring money overseas is as easy as going through your bank, but different organisations have different rules. If you’re not careful, you could end up paying costly fees and potentially losing money.
Sending funds overseas can feel like a bit of a minefield if you’re new to the process, and it’s natural to have lots of questions. How much does it cost? How can you get the best exchange rates? And is it safe to send money abroad? Thankfully, we’re here to answer all of these questions, and more, in this easy-to-follow guide.
There’s no single best way to send money abroad because there are lots of variables to consider. From how much you’re sending and where it’s going to how fast you need to transfer it, the currencies involved, and more. However, there is good practice for sending money abroad.
Let’s look at how international money transfers work, steps to stay safe and the options for sending funds abroad. Then, you can find the method that best suits you and make a well-informed decision.
What are the most common reasons for transferring funds overseas, and how can they help determine the best way to go about it? Reasons for sending money abroad include:
Overseas mortgage payments and bills associated with maintaining a second home
Buying a property in another country
Selling an overseas property
Paying for a significant event overseas, such as a wedding
Student fees for an international student
Sending money to family or friends who live overseas or who may be travelling abroad
Paying for goods or services overseas. For example, if you have a business that works with international suppliers
Alongside these examples, you may also be interested in the best way to transfer funds between countries due to current events affecting the financial landscape. In times of political uncertainty and fluctuating global currencies, it can pay to understand the best ways to move money. You never know when that knowledge might come in handy.
There are two main costs associated with transferring funds overseas:
1. The fee
Banks and other providers can charge any number of fees for the service. These can vary between companies, and some apply to both the sender and the recipient.
2. The exchange rate
Essentially the price of one currency compared with another. This can change minute by minute, hour by hour, so it can be hard to find out the best rate at any given moment. Many providers also don’t publish their daily rates, which can make comparing tricky.
Don’t be fooled by no-fee or fee-free transfers, as companies often recoup the fee by giving you a worse exchange rate. This is known as a hidden charge.
As it turns out, this depends on many different factors, so there isn’t a single most affordable way every time. What can affect this?
1. How much you’re sending
Banks are ideal for sending smaller amounts, and there are also online services and e-commerce payment systems that you can use to make payments from as little as £1. This is ideal for paying someone overseas for goods received, where it wouldn’t make sense to pay the fees a bank might charge.
However, for more considerable sums of money, typically anything over £5,000, you’re usually better off working with a foreign exchange broker.
2. How quickly you want the transfer to go through
Does it matter if the transfer takes a few working days to go through? Or does the money need to reach the recipient immediately? While banks can take longer to send money overseas, instant transfer companies can send money in minutes, albeit for a higher charge.
3. How secure you need the transfer to be
Safety is always a key consideration, especially if you’re transferring a large amount of money. This might be the case if you’re buying or selling a property, for example.
Alongside these factors, there’s also the question of how often the payment needs to be made. For example, is it a one-off payment or ongoing, and whether the recipient needs the funds as cash? The cost can also vary based on your own circumstances, including who you bank with.
Altogether, these factors can influence the best way to send money abroad. When we say best, that’s the cheapest, fastest, and safest way.
We’ve mentioned banks already, but what are the main ways to send money abroad?
1. Bank or building society
The most secure option. Your money is protected by the UK’s Financial Services Compensation Scheme (FSCS). It can also be easy to arrange if you’re using your existing bank. However, it’s not the fastest way to send money, and the exchange rates might not be as competitive as other providers, especially for amounts over £5,000.
2. Online money transfers
A good alternative for smaller international transfers or payments, these can be cheap and fast, but you don’t get the same protection as with a UK bank.
3. Foreign exchange brokers
Often offer lower fees and better exchange rates for more significant sums of money (typically over £5,000). It’s relatively fast, and you can set up regular payments. However, you’ll need to set up an account, and it won’t be covered by the FSCS.
4. Instant transfer firms
The fastest option. This is usually easy to arrange too. However, it’s the least safe option, and the fees and exchange rates can vary, so it can be more expensive.
As you can see, there’s no single best method, and each option has its own pros and cons depending on your particular needs. Generally speaking, banks are the safest option. Foreign exchange brokers are best for large transfers, while instant transfer firms are the fastest for emergencies and urgent cash. Online transfer companies are a decent all-rounder for smaller sums of money.
While transferring funds abroad usually takes a few working days, there are certain situations where speed is everything. For example, if a loved one is backpacking overseas and urgently needs cash for an emergency, a few days might be too long a wait. Thankfully, there are ways to transfer money in minutes, but this may come at an extra cost. You can even send money to a person who doesn’t have a bank account in that country.
Several businesses specialise in fast transfers to different countries. Two of the biggest operators are MoneyGram and Western Union. You can transfer money to one of their branches, located in countries worldwide, online or in-person. These often have counters in banks, post offices, and newsagents. In the UK, the Post Office works with Western Union, which has many agent locations in over 200 countries and territories where money can be transferred and cash can be collected.
The trick is to ensure the operator has a physical location near the recipient, like a family or friend overseas. They can then pick up the money as soon as they can get to the branch, using ID or a secure reference code. In most cases, the recipient won’t have to pay anything, but you might get charged a pickup fee on their behalf.
These kinds of transfers are typically more expensive in terms of fees and exchange rates, so you might prefer to save them for emergencies.
UK bank accounts are protected by schemes designed to safeguard customers if a provider goes bankrupt overnight. However, when you send your money overseas, you’re immediately entering into a different regulatory world. It’s not just the danger of smaller providers or international money transfer operators going bust. Other kinds of problems can arise, including your money suddenly disappearing during a transaction.
Whereas UK bank accounts are regulated and protected, there is no guarantee of getting your money back from an online transfer company if the worst happens. The Financial Conduct Authority (FCA) does monitor these companies, and regulations are getting stricter. However, they are still riskier than using high street banks.
There are two different types of regulations to look out for when it comes to overseas transfer companies, and they have crucial differences:
1. FCA authorised
This is the highest level of protection for payment service institutions such as money transfer companies. Businesses authorised by the FCA must safeguard customer’s money by separating it from their own funds at the end of each business day. In theory, this means your money should be safe if the company gets into financial difficulty. There is no guarantee, but a refund or compensation would be more likely from a business ‘authorised’ by the FCA.
2. FCA registered
Suppose an operator is only registered with the FCA. In that case, this means they have no safeguards or safety processes in place to protect your money.
If you’re considering sending money overseas, then it’s worth checking whether the provider is FCA ‘authorised’ or ‘registered’. There are money transfer scams out there, so it’s worth being careful. If you’ve checked the FCA status and you’re still worried, then you might be better off with a high street bank that can offer protection at a higher price.
While this can vary depending on the method you’ve chosen, you usually need:
International Bank Account Number (IBAN)
Bank Identifier Code (BIC)
This can vary between foreign exchange brokers, online transfer companies, and e-commerce. You’ll typically need the name, sort code, account number, and sometimes the recipient’s email. One of the exceptions is when you’re wiring cash to a person in urgent need.
Suppose you’re travelling to another country yourself and want to spend money on day-to-day expenses. In that case, specialist travel credit and debit cards are one of the best value options. You can pay for goods and services, withdraw cash at a great exchange rate, and have minimal fees.
Another good feature of these cards is that you can add a family member living abroad as a cardholder to the account. If your travel card is a credit card, it’s good practice to pay off the balance in full each month, ideally by direct debit, to avoid paying interest.
As an alternative to travel cards, you can also get no fee foreign transaction credit cards. However, there is a charge for cash withdrawals with these cards. It’s worth reading up on credit cards to work out the best option for your overseas spending habits.
You can send money abroad practically at the touch of a button these days. Still, if you want to get the best exchange rates, pay the lowest fees, keep your money safe, and transfer funds quickly, then it’s worth doing your research first.
There are lots of different factors to take into account when sending money abroad. These can determine the best method for your particular needs. It’s all about finding the right option for you.