The pound has plummeted to less than 1.15 versus the euro and 1.3 from the dollar, the cheapest for many years. So finding the currency exchange is more essential than ever. But this post is not about holiday money. It’s about people that must send small sums regularly, and those making large one-off transfers, like buying a holiday property. It reveals that some providers are good for large sums, but pricey for smaller transfers – and it also notifys you to prevent 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 must be: “After all the charges, the number of euros/yen/dollars etc can i get for X pounds?” To get this done, check just how much you will be offered from the mid-market “interbank rate”, the pace used when banks trade between another. You should check the live interbank rate on XE.com.
Secondly, you will be reasonably certian that the deal made available from 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 offer a poor exchange rate on top of that. The good thing is that several alternatives give you much better value.”
Our third golden rule is that, if transferring a sizeable sum right into a foreign account, first send a tiny sum and look it has been received, just as much to ensure you have sent it to the correct account as everything else. Only then should you really send the complete amount.
Almost all major banks charge lots of money for transferring money overseas, and provide an inadequate exchange rate on top of that
James Daley, Fairer Finance
Finally, remember there exists relatively limited protection should things go awry. The currency brokers might be “authorised” through the Financial Conduct Authority (FCA) or perhaps “registered”. Authorised firms should keep clients’ money outside of the company’s own funds. In case a firm is simply registered together with the FCA there’s a danger each of the money is within the same pot and may be lost in case the company went bust.
“Even in case a firm is FCA authorised, it’s crucial that you recognize that there is not any defense against the Financial Services Compensation Scheme in this sector,” says Daley. “So if a firm goes bust due to a fraud, there’s still an opportunity that you won’t get your money back. However, the hazards if you’re employing a big brand are fairly small.”
In 2010, Crown Currency Exchange, located 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 an extravagance home. Three people involved in the scam happen to be 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 perfect for dollars. UKForex is FCA authorised as opposed to registered, which is a subsidiary of the Australian group, OFX. TransferWise can be a peer-to-peer service (see below), headquartered in the uk and run by Estonians. Investors in the business include Richard Branson.
Worst with this bracket were MoneyGram and NatWest, which goes toward show why you shouldn’t automatically use famous names. For £200, NatWest would give us only $229.31, in contrast to $260.94 from TransferWise.
Best for mid-size sums When transferring £2,000, the Currency Account (for euros) and TransferWise (dollars) were best. The Currency Account is a relatively new and small company, formed in 2014, and it is authorised through the FCA. It describes itself as a “hybrid” peer-to-peer plus direct market access company.
Best for large sums We checked rates on moving £150,000, a sum where you would be seriously upset if something went wrong. Again, the Currency Account came top for euros, though there is almost no between it and the other brokers. HiFX came top in the bracket for dollars. HiFX was established in 1998 and is amongst the largest brokers, having transferred around £100bn ever since then.
Currency brokers There are numerous currency brokers or money transfer specialists. Some examples are MoneyCorp, Currencies Direct, CaxtonFX, TorFX, HiFX, UKForex, FairFX, Azimo and Xendpay. They pretty much all advertise “bank beating” rates, but just how will they compare against one another?
A handful of currency comparison sites can be found, nonetheless they won’t necessarily find the best deal. If you’re looking for the most bang for your buck you would be better off planning to individual companies, getting a quote and asking how long the transfer is going to take. When you see a firm offering a good deal, take a look at its reputation by using FXCompared, TrustPilot or even a general Google search.
Established firms are often, but not always, by far 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 one of a new type of peer-to-peer operators which remove the banks and brokers by offering an online meeting spot for people seeking to buy each other’s currencies. You don’t send your hard earned money directly, rather to the foreign currency exchange 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 reduce the crazy fees that banks charge consumers,” says Taavet Hinrikus, co-founder of TransferWise.
Another peer-to-peer platform, CurrencyFair, works in the similar way, even though exchange rates are positioned by its users. In the event that there are actually no customers providing a significant rate for the exchange, CurrencyFair will part in and match with you. The web page claims customers typically pay .35% in the amount exchanged as well as a fixed €3 transfer fee.
If you want to pay in cash or transfer money quickly, Western Union and MoneyGram have branches around the high street – but their services are certainly not cheap and just ideal for a small amount. Even though companies themselves are legitimate, they are often employed by scammers, so be skeptical of strangers asking for payment this way.
PayPal will make it simple to send money overseas, but was the highest priced option in half the Guardian calculations. It whacks on 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 season in which the Currency Account was create. It must have said 2014, not 2011.
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