The pound has plummeted to under 1.15 from the euro and 1.3 up against the dollar, the cheapest for years. So locating the currency and transfers is much more essential than in the past. But this information is not about holiday money. It’s about people who must send small sums regularly, and people making large one-off transfers, such as getting a holiday property. It reveals that some providers are great for large sums, but pricey for smaller transfers – plus it lets you know to avoid PayPal, which came out particularly poorly inside our price survey.
Consumers should first cut through any nonsense about “no fees” or “no commission”. Your key question should be: “After all of the charges, just how many euros/yen/dollars etc will I get for X pounds?” To do this, check simply how much you will be offered against the mid-market “interbank rate”, the rate used when banks trade between one other. You can check the live interbank rate on XE.com.
Secondly, you may be reasonably certian how the deal made available from your high street bank will probably be pretty lousy, unless you are a “premier” type customer transferring large sums.
James Daley of Fairer Finance says: “Almost all major banks charge lots of money for transferring money overseas, and offer a bad exchange rate to boot. Fortunately that numerous alternatives offer you much better value.”
Our third golden rule is, if transferring a sizeable sum right into a foreign account, first send a small sum and check it has been received, just as much to make sure you have sent it to the right account as other things. Only then should you really send the total amount.
Virtually all major banks charge big money for transferring money overseas, and offer an inadequate exchange rate to boot
James Daley, Fairer Finance
Finally, remember there may be relatively limited protection should things fail. The currency brokers might be “authorised” with the Financial Conduct Authority (FCA) or just “registered”. Authorised firms should keep clients’ money apart from the company’s own funds. If your firm is simply registered together with the FCA there’s a danger all of the money is incorporated in the same pot and might be lost when the company went bust.
“Even in case a firm is FCA authorised, it’s essential to recognize that there is not any defense against the Financial Services Compensation Scheme with this sector,” says Daley. “So if a firm goes bust as a result of fraud, there’s still an opportunity that you just won’t get a refund. However, the hazards if you’re by using a big brand are fairly small.”
During 2010, Crown Currency Exchange, based in Hayle, Cornwall, went bust, leaving 3,000 people owed £20m. It used new customers’ cash to settle existing clients, along with fund the purchase of a high end home. Three people in the scam have already been jailed.
We obtained quotes for moving £200, £2,000 and £150,000 into euros and dollars. We conducted the test on 29 July if the pound was fetching €1.19 and $1.32 respectively, but sadly they have since fallen further.
Best for small sums When transferring £200 we found UKForex ideal for euros and TransferWise best for dollars. UKForex is FCA authorised as opposed to registered, and is also a subsidiary of your Australian group, OFX. TransferWise is a peer-to-peer service (see below), headquartered in the uk and run by Estonians. Investors in the industry include Richard Branson.
Worst with this bracket were MoneyGram and NatWest, which goes toward show why you shouldn’t automatically use well-known names. For £200, NatWest will give us only $229.31, in contrast to $260.94 from TransferWise.
Great for mid-size sums When transferring £2,000, the Currency Account (for euros) and TransferWise (dollars) were best. The Currency Account is a relatively recent and small company, formed in 2014, which is authorised by the FCA. It describes itself as being a “hybrid” peer-to-peer plus direct market access company.
Great for large sums We checked rates on moving £150,000, a sum where you will be seriously upset if anything went wrong. Again, the Currency Account came top for euros, though there seemed to be almost no between it along with the other brokers. HiFX came top in the bracket for dollars. HiFX was established in 1998 and is probably the largest brokers, having transferred around £100bn since that time.
Currency brokers There are loads of currency brokers or money transfer specialists. Some examples are MoneyCorp, Currencies Direct, CaxtonFX, TorFX, HiFX, UKForex, FairFX, Azimo and Xendpay. They just about all advertise “bank beating” rates, but how do they really compare against each other?
Some currency comparison sites can be purchased, but they won’t necessarily find the best deal. If you’re looking for the best value for your money you would be more satisfied going to individual companies, receiving a quote and asking how much time the transfer will take. When you see a business offering a good deal, look at its reputation by using FXCompared, TrustPilot or a general Internet search.
Established firms are usually, although not always, one of the most reliable. Some smaller brokers and “disruptive” web platforms temporarily stopped trading throughout the EU referendum aftermath.
Peer-to-peer services TransferWise is just one of a brand new breed of peer-to-peer operators which cut out the banks and brokers through providing an internet meeting location for people seeking to buy each other’s currencies. You don’t send your hard earned money directly, rather on the foreign exchange firm which in turn passes it on.
“Our exchanges derive from free or extremely low-cost local banking accounts transfers. We don’t send money overseas, so can eliminate the crazy fees that banks charge consumers,” says Taavet Hinrikus, co-founding father of TransferWise.
Another peer-to-peer platform, CurrencyFair, works inside a similar way, even though exchange rates are positioned by its users. When you will find no customers providing a significant rate to your exchange, CurrencyFair will part of and complement you. The website claims customers typically pay .35% in the amount exchanged as well as a fixed €3 transfer fee.
If you have to pay in cash or transfer money quickly, Western Union and MoneyGram have branches in the high street – but their services will not be cheap and simply suited to a small amount. And while the companies themselves are legitimate, they are generally used by scammers, so be suspicious of strangers asking for payment in this way.
PayPal may make it easier to send out money overseas, but was the costliest option in two the Guardian calculations. It whacks with a hefty conversion fee if you would like pay someone in another currency.
This informative article was amended on 22 August to fix the season where the Currency Account was put in place. It ought to have said 2014, not 2011.
… there exists a small favour to inquire. More and more people are reading the Guardian than ever before but advertising revenues across the media are falling fast. And unlike many news organisations, we haven’t create a paywall – we would like to keep our journalism as open when we can. To help you realize why we need to demand your help. The Guardian’s independent, investigative journalism takes considerable time, money and perseverance to make. But we do it because we think our perspective matters – since it might well be your perspective, too.