How to save money on foreign currency transfers

There are times when we need to send money abroad, maybe as a gift for a friend or when your daughter is backpacking around the world and needs emergency funds. If you are not sure of the process for currency transfers, this country-specific guide from Currency Index is a great place to start.

Foreign currency transfer can be an expensive way of sending money, with some banks charging fees of £25. However, there are always alternatives and here we look at the best money saving options.

Before You Begin

Before you start looking for the best rate there are two key things to consider.

1. Safety

The Financial Compensation Scheme does not cover overseas currency transfer firms, should they go out of business whilst transferring your cash. Therefore, there is no absolute guarantee of getting your money back.

However, you can mitigate your risk somewhat as the transfer firms themselves will fall into two camps either ‘authorised’ or ‘registered’.

If they are authorised this will fall under the Financial Conduct Authority and this ensures that your money in transfer is kept separate from their own, so should the organisation go bust, you should in theory get your money back. Although just to reiterate,this is not a guarantee.

If the firm is registered there is no safety mechanism in place, which would mean you would not receive the money back, should the company go out of business whilst the money was being transferred.

This is particularly important to remember when you are transferring large sums of money.

2.Speed

The type of transfer you can undertake will depend in large part on how quickly the money is needed at the other end.

There are a few companies that offer instant transfers, but these will be more expensive. If you can afford for it to take a little longer there will be more low cost options available.

Compare Rates      

It can seem complicated to decipher which company is going to cost you the least amount of money when you want to transfer currency abroad. What it comes down to though, after all the fees and the exchange rates have been calculated, is how many dollars, euros or yen will you get for your pound. The more that is actually being transferred, rather than eaten up in fees, means that you have found the best deal. Therefore, when you do a market comparison, let the final figure be your indicator of the best rate.

Use Cashback Cards

If you have a credit card that offers you either loyalty points or better yet, a cashback percentage, then use this to make the transfer. In this way you are at least saving the 2%, or whatever it is that you get on the card. This is particularly important if you do transfers regularly as it can add up substantially. The only caveat is to check that the card does offer cashback on transfers, as sometimes it is not on all transactions, but only on purchases.

No Fee Transfers between Linked Banks

Some banks will allow you to transfer money, fee free, between your account in the UK and another person’s account abroad. This is usually only the case if the bank abroad is an overseas arm of the same banking group. This can be useful if you need to regularly transfer money to family members of if you have a house abroad. Always check with the bank when opening an account whether they offer this benefit.

As you can see, there is a lot to consider when making a foreign currency transfer abroad. Speed, safety and expense all will play a part in your decision. Ensure therefore that you carry out adequate research before you move ahead and take advantage of the best money saving options that are available to you at the time.