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What is an international money transfer?
An international money transfer is an electronic transfer of money to family, friends or a company overseas. You send money from your bank account to an intermediary transfer service or a bank, which then exchanges and sends the money through to the recipient’s bank account in another country.
There are two ways that a provider makes money on your transfer.
- One is the transaction fee, which is the fixed amount you’re charged for using the service.
- The second is through the exchange rate, which will vary from provider to provider.
Finding the lowest rates is usually the best way to find the cheapest deal. Let us explain this in a bit more detail.
Unlike a savings account or a current account, you’re not entitled to any compensation if your provider goes bankrupt.
If you use an online transfer company and it goes bust, there are no guarantees that you can claim the money back. This might sound scary, but regulation on these companies is extremely rigorous. The chances of them going bankrupt are very, very low.
Here’s an important distinction to make:
- If your provider is “authorised” by the Financial Conduct Authority (FCA), your money is ring-fenced. You should be able to get it back if the provider goes bust.
- If your provider is only “registered”, there are no guarantees.
You can check the status of companies easily enough by searching the name in the FCA register.
Consider the purpose of your transfer. Are you sending money to friends and family overseas or are you a business looking to pay for goods and services, potentially regularly?
For business owners, time is hugely important. Without time to research our options, we often end up going with our bank. But a little planning can set you up for significant savings on your transfers.
If you send transfers of £1,000 every week, you could save around £17.50 each time. That’s a savings of £875 a year simply by choosing a competitive independent service over your bank!
- Learn how to save on business transfers and see our £1,000 case study
- Making regular transfers: The best way to set up a recurring transaction
Most online money transfer services allow you to send and receive money almost instantly. It’s transferring the money from the service into your bank account that might take a few days. Similarly, bank-to-bank transfers also take a few days to clear.
If you need to send a same-day or emergency transfer, most of the services allowing you to send and receive cash will allow your recipient to pick up their funds quickly, often within an hour.
The currencies available for you to send overseas can vary depending on the company you choose. Some services may only offer transfers in a few major currencies, while others will allow you to send transfers in up to 50 currencies or more.
Commonly traded currencies include the following:
Don’t see your country listed?
There’s no “best” way to transfer funds overseas. It depends on how much you’re sending, how soon you need it to be made available and the exchange rates at the time. But below are a few tips you can use when sending money overseas.
- Know your transfer currency’s mid-market rate. This rate is the midpoint between worldwide supply and demand for that currency – and the rate banks and transfer services use when they trade among themselves. Use it as a baseline to compare against the rates you’re being offered. The company that’s closest is offering you the best rate.
- Send more money per transfer. Many services discount the fees or waive them altogether when you send larger transfers. HiFX, for example, waives fees for all transfers above £3000. Sending less comes with a flat £9 fee.
- Use forward contracts and limit orders if sending money regularly. A forward contract allows you to lock in a favourable exchange rate for future transfers. This means you avoid unpredictable movements in exchange rates. A limit order allows you to wait until a favourable exchange rate is found and then locks it in for your transfer.
- Send same-currency transfers. It can sometimes be cheaper to transfer US dollars to your recipient, allowing them to transfer the dollars into their own currency when received. Depending on the situation, your recipient could pay lower fees overall.
You’ve undoubtedly heard about somebody who has fallen prey to a money transfer scam. Scammers are becoming more sophisticated, using increasingly elaborate plans in an effort to separate you from your money.
The following are some common scams to look out for:
- Advance fee scams. Maybe you have been notified you’ve won a prize or the lottery, but you need to first pay a fee to receive it. Or perhaps you have been “approved” for a loan but must wire a down payment. In both cases, you’re probably dealing with a scammer.
- Bogus check scams. You may have gotten a reply to your online auction with a check that’s for more than your item – all you need to do is wire back the difference. The check is likely fake, leaving you on the hook for both the money you wire and a bounced check fee from your bank.
- Wire payments only scams. If anybody online says you can pay only with a wire transfer, find another retailer to do your business with.
- Phishing scams. Be wary of unsolicited emails or calls asking you to resend or confirm personal information or passwords. Instead, take down the name of the company and contact them directly with questions.
If you suspect you might be the victim of a scam, contact the FCA.
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