The pound has plummeted to under 1.15 up against the euro and 1.3 versus the dollar, the cheapest for a long time. So locating the foreign exchange is much more essential than in the past. But this post is not about holiday money. It’s about individuals who have to send small sums regularly, and the ones making large one-off transfers, like buying a holiday property. It reveals that some providers are great for large sums, but pricey for smaller transfers – and it notifys you to avoid PayPal, which came out particularly poorly in our price survey.
Consumers should first cut through any nonsense about “no fees” or “no commission”. Your key question must be: “After each of the charges, the amount of euros/yen/dollars etc am i going to get for X pounds?” To achieve this, check exactly how much you are offered against the mid-market “interbank rate”, the pace used when banks trade between another. You can examine the live interbank rate on XE.com.
Secondly, you can be reasonably certian how the deal made available from your high street bank will be pretty lousy, unless you happen to be “premier” type customer transferring substantial sums.
James Daley of Fairer Finance says: “Almost all major banks charge big money for transferring money overseas, and offer an inadequate exchange rate to boot. The great thing is that numerous alternatives provide you with a lot 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 really has been received, all the to make sure you have sent it to the right account as everything else. Only then in the event you send the total amount.
Virtually all major banks charge lots of money for transferring money overseas, and provide a terrible exchange rate on top of that
James Daley, Fairer Finance
Finally, remember there is certainly relatively limited protection should things go awry. The currency brokers could be “authorised” by the Financial Conduct Authority (FCA) or maybe “registered”. Authorised firms should keep clients’ money separate from the company’s own funds. When a firm is simply registered using the FCA there’s a danger every one of the money is in the same pot and may be lost in case the company went bust.
“Even if a firm is FCA authorised, it’s vital that you know that there is no protection from the Financial Services Compensation Scheme with this sector,” says Daley. “So if your firm goes bust because of a fraud, there’s still a chance which you won’t get a refund. However, the hazards if you’re by using a big brand are fairly small.”
In 2010, Crown Foreign Exchange, situated in Hayle, Cornwall, went bust, leaving 3,000 people owed £20m. It used new customers’ cash to pay off existing clients, and also fund purchasing an extravagance home. Three people working in the scam have been jailed.
We obtained quotes for moving £200, £2,000 and £150,000 into euros and dollars. We conducted the test on 29 July once the pound was fetching €1.19 and $1.32 respectively, but sadly it offers since fallen further.
Great for small sums When transferring £200 we found UKForex ideal for euros and TransferWise ideal for dollars. UKForex is FCA authorised as an alternative to registered, and it is a subsidiary of the Australian group, OFX. TransferWise can be a peer-to-peer service (see below), headquartered in London and run by Estonians. Investors in the industry include Richard Branson.
Worst in this bracket were MoneyGram and NatWest, which would go to show why you shouldn’t automatically use famous names. For £200, NatWest will give us only $229.31, in comparison with $260.94 from TransferWise.
Ideal for mid-size sums When transferring £2,000, the Currency Account (for euros) and TransferWise (dollars) were best. The Currency Account is actually a relatively new and small company, formed in 2014, and is authorised with the FCA. It describes itself being a “hybrid” peer-to-peer plus direct market access company.
Perfect for large sums We checked rates on moving £150,000, a sum where you would be seriously upset if anything went wrong. Again, the Currency Account came top for euros, though there is hardly any between it and the other brokers. HiFX came top from the bracket for dollars. HiFX was established in 1998 and is amongst the largest brokers, having transferred around £100bn since that time.
Currency brokers There are loads of currency brokers or money transfer specialists. Such as MoneyCorp, Currencies Direct, CaxtonFX, TorFX, HiFX, UKForex, FairFX, Azimo and Xendpay. They virtually all advertise “bank beating” rates, so how do they really compare against each other?
A handful of currency comparison sites can be found, however they won’t necessarily get the best deal. If you’re looking for the best value for your money you will be happier likely to individual companies, getting a quote and asking how much time the transfer can take. When you see a firm offering the best value, have a look at its reputation by making use of FXCompared, TrustPilot or possibly a general Internet search.
Established firms are generally, however, not always, the most reliable. Some smaller brokers and “disruptive” web platforms temporarily stopped trading during the EU referendum aftermath.
Peer-to-peer services TransferWise is one of a brand new type of peer-to-peer operators which remove the banks and brokers by offering a web-based meeting spot for people seeking to buy each other’s currencies. You don’t send your hard earned dollars directly, rather on the forex firm which then passes it on.
“Our exchanges derive from free or extremely low-cost local banking accounts transfers. We don’t send money overseas, so can reduce the crazy fees that banks charge consumers,” says Taavet Hinrikus, co-founding father of TransferWise.
Another peer-to-peer platform, CurrencyFair, works within a similar way, although the exchange rates are positioned by its users. In cases where you will find no customers providing a reliable rate for the exchange, CurrencyFair will step in and complement you. The website claims customers typically pay .35% from the amount exchanged plus a fixed €3 transfer fee.
If you wish to pay in cash or transfer money quickly, Western Union and MoneyGram both have branches about the high street – but their services will not be cheap and just appropriate for small amounts. And although the businesses themselves are legitimate, they are generally employed by scammers, so be suspicious of strangers asking for payment this way.
PayPal will make it simple to send out money overseas, but was the most costly option by 50 percent the Guardian calculations. It whacks on a hefty conversion fee if you wish to pay someone in another currency.
This article was amended on 22 August to correct the season where the Currency Account was create. It should have said 2014, not 2011.
… there exists a small favour to ask. More and more people are reading the Guardian than in the past but advertising revenues throughout the media are falling fast. And unlike many news organisations, we haven’t set up a paywall – we wish to keep our journalism as open when we can. In order to realize why we must request your help. The Guardian’s independent, investigative journalism takes a lot of time, money and effort to make. But perform it because we know our perspective matters – because it might well become the perfect perspective, too.