The pound has plummeted to lower than 1.15 against the euro and 1.3 versus the dollar, the smallest for many years. So finding the foreign exchange is far more essential than ever. But this post is not about holiday money. It’s about people who have to send small sums regularly, and the ones making large one-off transfers, such as investing in a holiday property. It reveals that some providers are great for large sums, but pricey for smaller transfers – and it tells you to prevent PayPal, which arrived particularly poorly inside our price survey.
Consumers should first cut through any nonsense about “no fees” or “no commission”. Your key question ought to be: “After all of the charges, the amount of euros/yen/dollars etc can i get for X pounds?” To do this, check how much you are offered against the mid-market “interbank rate”, the pace used when banks trade between one other. You can check the live interbank rate on XE.com.
Secondly, you could be reasonably certian that the deal offered by your high street bank will probably be pretty lousy, unless you are a “premier” type customer transferring very large sums.
James Daley of Fairer Finance says: “Almost all major banks charge big money for transferring money overseas, and present an inadequate exchange rate to boot. The good news is that several alternatives provide you far better value.”
Our third golden rule is the fact, if transferring a sizeable sum in a foreign account, first send a tiny sum and check it really has been received, all the to ensure you have sent it on the right account as whatever else. Only then in the event you send the total amount.
Almost all major banks charge lots of money for transferring money overseas, and present a poor exchange rate on top of that
James Daley, Fairer Finance
Finally, remember there is relatively limited protection should things go wrong. The currency brokers might be “authorised” by the Financial Conduct Authority (FCA) or maybe “registered”. Authorised firms should keep clients’ money apart from the company’s own funds. When a firm is merely registered with all the FCA there’s a danger each of the money is in the same pot and can be lost in case the company went bust.
“Even when a firm is FCA authorised, it’s essential to recognize that there is not any defense against the Financial Services Compensation Scheme in this particular sector,” says Daley. “So if a firm goes bust because of fraud, there’s still an opportunity that you simply won’t get a refund. However, the potential risks if you’re using a big brand are fairly small.”
In 2010, Crown Foreign Exchange, operating out of Hayle, Cornwall, went bust, leaving 3,000 people owed £20m. It used new customers’ cash to repay existing clients, along with fund purchasing a high end home. Three people active in the scam are already jailed.
We obtained quotes for moving £200, £2,000 and £150,000 into euros and dollars. We conducted the exam on 29 July as soon as the pound was fetching €1.19 and $1.32 respectively, but sadly it offers since fallen further.
Perfect for small sums When transferring £200 we found UKForex perfect for euros and TransferWise best for dollars. UKForex is FCA authorised as opposed to registered, and is a subsidiary of an Australian group, OFX. TransferWise is really a peer-to-peer service (see below), headquartered inside london and run by Estonians. Investors in the market include Richard Branson.
Worst in this bracket were MoneyGram and NatWest, which would go to show why you shouldn’t automatically use popular names. For £200, NatWest would 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 actually a relatively new and small company, formed in 2014, and is authorised with 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 would be seriously upset if anything went wrong. Again, the Currency Account came top for euros, though there seemed to be minimal between it as well as the other brokers. HiFX came top inside 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. These include MoneyCorp, Currencies Direct, CaxtonFX, TorFX, HiFX, UKForex, FairFX, Azimo and Xendpay. They just about all advertise “bank beating” rates, but how can they compare against one another?
A handful of currency comparison sites are available, nevertheless they won’t necessarily look for the best deal. If you’re looking for the most value for your money you would be happier going to individual companies, acquiring a quote and asking just how long the transfer is going to take. Once you see a business offering a good price, take a look at its reputation by utilizing FXCompared, TrustPilot or a general Google search.
Established firms are usually, yet not always, probably the most reliable. Some smaller brokers and “disruptive” web platforms temporarily stopped trading through the EU referendum aftermath.
Peer-to-peer services TransferWise is among a fresh type of peer-to-peer operators which reduce financial institutions and brokers by supplying an internet meeting area for people wanting to buy each other’s currencies. You don’t send your cash directly, rather towards the forex firm which in turn passes it on.
“Our exchanges derive from free or extremely low-cost local checking account transfers. We don’t send money overseas, so can cut out the crazy fees that banks charge consumers,” says Taavet Hinrikus, co-founder of TransferWise.
Another peer-to-peer platform, CurrencyFair, works inside a similar way, even though the exchange rates are set by its users. In the event that there are actually no customers providing a significant rate for the exchange, CurrencyFair will part of and complement you. The internet site claims customers typically pay .35% from the amount exchanged including a fixed €3 transfer fee.
Other available choices
If you need to pay in cash or transfer money quickly, Western Union and MoneyGram both have branches in the high-street – but their services usually are not cheap and merely appropriate for small amounts. And although the companies are legitimate, they are generally made use of by scammers, so be wary of strangers seeking payment this way.
PayPal may make it easy to send out money overseas, but was the most costly option in half the Guardian calculations. It whacks over a hefty conversion fee if you wish to pay someone in another currency.
This post was amended on 22 August to take care of the entire year where the Currency Account was setup. It should have said 2014, not 2011.
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