Find out how you can get the best value for your money when sending or receiving funds overseas.
If you’re sending money overseas for any reason, the exchange rate is a crucial factor in determining how much of the money you transfer actually arrives in your recipient’s bank account. Differences in exchange rates can have a huge impact on the cost-effectiveness of your transaction, so it’s worthwhile shopping around to find the best available exchange rate before sending funds internationally.
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What is the exchange rate?
The exchange rate shows the value of two currencies relative to one another. You’ll see it expressed as a simple formula showing how much the Pound is worth when compared to other global currencies, for example 1 GBP = 1.51 USD.
There are multiple factors that affect the exchange rate, including everything from supply and demand for a particular currency to levels of consumer confidence and spending. Even current events, for example political instability or a natural disaster, can have an impact on the value of a currency.
In many cases, the exchange rate won’t have all that much of a noticeable effect on your daily life. But if you’re buying goods or services from overseas, travelling overseas or sending money overseas, you will need to take current exchange rates into account.Back to top
How can I find the best exchange rate?
Finding a great exchange rate when you’re sending an international money transfer is critical, but it’s not the only expense to consider when transferring funds overseas. Transfer fees and other hidden charges can also turn the smallest of transactions into a much larger expense, so it pays to compare a range of options before choosing a transfer provider.
Keep these tips in mind when looking for the best available exchange rate:
- What is the current mid-market rate? You will probably have noticed that the exchange rate you see quoted in the financial news is different to the one that money transfer companies offer to their customers. That’s because the rate on the news is the mid-market rate, which is the price at which banks around the world purchase currency from one another. Check on this rate regularly so you know how much your Pounds are really worth, perhaps using a foreign exchange site like xe.com.
- Ask for a quote. Finding the best exchange rate available is pointless if your international money transfer comes with large fees attached. Obtaining a quote from several transfer companies is the best way to learn the full cost of any transfer and discover which providers offer the best value for money.
- Are you getting the right rate? As mentioned in the first bullet point, the mid-market rate and a company’s customer rate are two different things. Despite this, some providers won’t make it clear that when you use their online calculator to work out the cost of a transfer, the calculator will use the mid-market rate rather than the one you will actually receive. Make sure you are using the customer exchange rate when calculating the cost of a transfer.
- Can you place a forward contract? Some transfer providers offer the flexibility of placing a forward contract. This option allows you to lock in an exchange rate now, when the Pound is performing well relative to the currency of your choice, for a transfer that will be completed in the future. So if the value of the Pound drops in the interim, your money is protected against any decreases.
- Can you place a limit order? A limit order allows you to specify your desired transfer parameters, such as the exchange rate you would like for your transaction, and then the order will only be placed if your transfer conditions are met. This means you can take advantage of changing market conditions to send a more affordable transfer.
- Should you send a large transfer? Some transfer companies will offer better exchange rates when you send larger amounts of money, so sending one big transfer rather than several smaller ones is often a good idea. The transfer fee will also often be reduced or even waived when you transfer a large amount.
- Should you consider other options? If you regularly send and receive payments around the world, you may be able to find a cost-effective solution to your international payment problems by opening a multi-currency account with your bank. These accounts allow you to hold money in multiple currencies and then exchange the funds into Pounds when the exchange rate suits you.
How can I send an international money transfer?
One thing you’ll discover when hunting for the best exchange rate is that there are plenty of options to choose from when you want to send money overseas. Many people simply go with the easiest – and perhaps the most convenient – option and choose their bank to send the money overseas. The problem, however, is that banks offer some of the worst exchange rates you will find and usually also charge high transfer fees.
The absence of any value for money from the banks has led to the rise of online money transfer services in recent years. These providers, including Currency Fair, Currency Solutions, FairFX and many more, offer exchange rates far superior to those offered by the banks. They also offer lower fees in most cases, providing secure and fast online transfers from your bank account to your beneficiary’s account.
Another option worth considering is a money transfer company that allows you to send funds for cash collection. Your beneficiary is able to collect the funds you send by visiting their nearest transfer company branch. Providers like Western Union, MoneyGram and Xpress Money all operate extensive international transfer networks.
Depending on your circumstances, there are a couple of other options you may wish to consider. A banker’s draft, for example, is a secure yet slow international transfer method, while digital payment company PayPal can also be used for small funds transfers.
When Dave gets an urgent email from his brother, Sam, requesting urgent cash, Dave isn’t particularly surprised. Sam is backpacking around Australia and has never been known for his thriftiness, so Dave had already started putting money aside in case Sam ran out of money while on his travels. He agrees to send Sam £1,000 to help him pay for accommodation and food, but rather than simply send the funds straight away he decides to compare the fee and exchange rate on offer from his bank and from a money transfer company.
|Money transfer company||Bank|
|Exchange rate||1 GBP = 2.128 AUD||1 GBP = 2.0735 AUD|
|Transfer method||Online bank account transfer||International wire transfer|
|Processing time||3 business days||1-3 business days|
|Amount received (in AUD)||$2,128||$2073.50|
As Dave’s comparison shows, he’ll be able to send an extra AUD $54.50 to his brother when he uses the money transfer company, plus he will save £17.50 in transfer fees as opposed to using his bank.
Frequently asked questions
How can I find out what exchange rate a money transfer provider is offering?
Most companies offer price calculators on their websites to allow you to work out the total cost of your potential transaction. Just make sure the calculator uses the customer exchange rate rather than the mid-market exchange rate.
Can I schedule multiple payments in advance?
Yes, there are several online transfer companies that offer this service. However, make sure you’re aware of any fees that may be attached.
How come money transfer companies can offer better exchange rates than banks?
International transfers are just one of the many products and services that banks offer and far from the most important. On the other hand, money transfer companies specialise solely in international transactions. They trade large volumes of currency and don’t have the same overhead expenses as banks, which means they can usually offer you a better deal.
I want to compare the features of different transfer providers - where should I start?
Start the comparison process right here at finder.co.uk. We’ve collected a wealth of information and key facts about several trusted international transfer providers, helping you weigh up your options before you reach a final decision on how to send funds overseas.
Can I track my international transfer?
Yes, your provider should give you a tracking number after you have paid for your transfer.