Sending Money Abroad How to send cash overseas cheaply

Whether gifting a few quid to a Stateside nephew, or emergency funds to a backpacking daughter, sending money abroad means double the currencies, complications and costs - banks may charge up to £25.

This is a step-by-step guide to the cheapest way to send or pay money abroad, both regular payments or one-offs, saving you serious cash.

Also see:
Cheap Travel Money, Travel Money Maximiser

What will it cost?

When moving money, costs fall into two simple categories: fees and the exchange rate. It's crucial to check both out.

• Fees. The obvious charge.

  A multitude of fees, charges or commission can apply, both for the sender and the recipient. Many providers levy lots of small charges to disguise exactly how much it costs.

• Exchange rates. The hidden charge.

  Many companies claim to be 'commission free' then load the exchange rate so you get less buck for your pound. Worse still, it's often teeth-pullingly difficult to get hold of the exact rate and compare it, as some providers simply don't provide the data.

The best way to compare...

The minefield of complications actually boils down to a very simple question...

"How many Euros/Yen/Dollars will be received, after all charges?"

Sadly, sometimes it's hard to get an answer. Also, exchange rates change very regularly (possibly by the minute), so to compare providers properly do it all in one go.

To benchmark a decent rate, check the Travel Money Maximiser. If you're transferring a large amount, then at worst you should aim to equal the cheapest provider there.

To find the best deal, follow the steps below; each one lists who it's suitable for. Stop at the first method that suits you.

Use top credit card for regular transfers

These are designed to be used for purchases, so if you can, the easiest and cheapest system is to spend on specialist credit or debit cards. You can pay for things overseas at the best possible exchange rate with minimum fees.

By giving the card to a person you trust who is going overseas, as it's a UK account, you can pay off the balance in full each month for any purchases or withdrawals they make.

You get the best possible exchange rate

Most normal cards add a 3% 'load' on the exchange rate so £100 of foreign currency actually costs you £103. These don't, so you get the Visa / Mastercard wholesale rate, which is about as good as it gets and cheaper than buying foreign currency.

Plus unlike most cards, withdraw cash from an overseas ATM and they've either no or low fees.

The person who's going should take the plastic and use it to spend on or withdraw cash. As it's a UK account, you can pay money off the balance as normal.

ALWAYS set up a Direct Debit to pay it off in full each month, to avoid paying interest on any spending. You will pay a month's interest on credit card cash withdrawals, but this is almost negligible compared to the benefits.

The best card to use

For many more alternative options, including bank accounts, & detailed review of card differences & charges, read the Cheap Travel Money guide.

Free bank transfers - BOTH need the account

A number of banks allow you to transfer money to linked banks overseas without a fee; usually it's just the overseas version of the same banking group. Therefore if you and the person you want to send money to both open the accounts, you can cheaply move money between people.

The top fee-free bank services

A number of banks offer this service, they all work in different ways, and most importantly let you transfer to different countries.

There is one major point of difference though... one allows you to send money to anyone who holds an account with the same bank overseas, while frustratingly the other group require both the UK and the foreign account to be in YOUR name.

Online services for one-off small payments

A number of companies offer transfer payments over the internet, either through e-commerce systems or simply by moving your money into someone else's bank account, but the correct system depends on how much money you want to send.

There are a number of UK firms designed specifically for international money transfers. You pay them in sterling, usually via internet transfer, which they convert and send to the receiving bank within two to four working days. You'll need to set up an account and have your address verified first, which can take a few days.

It's also worth noting all credit card companies and some debit cards charge you a cash withdrawal fee when using them to pay for foreign currency, usually it's a pound or two. There's a full list of which cards do this in the Travel Money Maximiser.

Cheapest way - but via new 'peer-to-peer' system

Sending larger amounts (£5,000+)

When the amount you wish to transfer jumps to the 'serious' level, then the only players able to give a good rate are specialised Foreign Exchange (FX) brokers. There are a lot of companies, and the same lack of protection applies as above - so be very diligent in checking as there could be massive amounts at risk

How to do it?

When transferring larger sums, it's important to remember that even small differentials in exchange rates can make an enormous difference.

Think about it... a 1% rate improvement on £100,000 is a £1,000 gain. So finessing the very best rate takes on even more significance.

1. Benchmark the rate.

   Quickly go to the Travel Money Maximiser to check out the best rates there. That finds the top rates for getting cash when going on holiday, so you should be aiming to beat its best, after all fees.

2. Ask your bank for a quote.

   It's rare your bank will actually be the best buy. However, it's a very useful secondary benchmark and some have special facilities for existing customers, so it could come up trumps.

3. Use a specialist currency broker.

   These are companies that buy and sell vast sums of foreign currency which allows them to offer excellent exchange rates because, even if they only make a small percentage profit on every pound, that soon adds up when you're dealing in hundreds of millions of pounds.

There is no hard and fast rule to which currency broker is best, so get quotes from all of them to find the the best rate for your currency. The regularly quoted big brokers include such players as HIFX*, Currencies Direct* and Moneycorp*, so they're the obvious places to start - though of course they are still no more protected than others.

Typically they offer within 1% of the 'interbank rate', whereas your bank will normally be up to 3% worse than that, equating to £3,000 for a £100,000 transfer. In addition, most don't charge fees to send money, and the broker pays for any receiving fees, so all you pay is the margin they take via the exchange rate.

The rates for these change constantly, often by the minute, so to find out which gives the best rate to your chosen country you need to get quotes as close together as possible. And do remember, the golden question to ask is "how many Euros/Dollars/Yen will you give me for my £x,xxx after all fees and charges?"

Unfortunately, the less you transfer, the worse the rates available get, meaning this is only worth it for high value money switching. Plus, if you're looking to transfer more than £20,000, you'll often get a better rate calling to negotiate.

Please feedback on your experiences with FX brokers.

Need to send cash instantly?

The above methods will all take a few days for the money to hit the destination, although check first - some may only take a day and you'll be far better off if you can wait. But if speed is paramount, a few companies offer instant cash transfers to thousands of locations anywhere in the world. However, they ain't necessarily cheap...

Do remember it's far better, if possible, to set up the card system in step 1.

How does it work?

You either go into a branch (there are many in newsagents, Post Offices and banks) or pay the money online. The recipient then picks it up at an agency at the other end once it's done (they don't need to be there that moment). They can either present ID or if that's a problem, a code can be used to legitimise the transfer.

The cheapest instant transfers

The word cheapest should only be used advisedly here, this isn't a cheap service, and should only be done if necessary. It's extremely expensive, especially for small amounts, though the recipient won't normally need to pay a fee.

The most important thing to do in this case, is check that there's an agent/branch where the recipient can pick up the cash. The two big operators are Moneygram and the more famous Western Union.

If you've the luxury of a choice between the two, check both and choose the cheapest for the amount and country you're sending money to. Moneygram's usually cheaper for smaller amounts, at from £4.50 to send £100, but Western Union may be better for amounts up to £4,000, and for sending to America or outside the eurozone.

However there are firms which provide transfers from the UK to specific countries, which can often be found in areas where there's a large community of those of that ethnic origin.

Both the big buys here are FCA-authorised, which is the highest protection a currency broker can have, but still not brill - read full details in Am I protected?