Property, holidays, collectables and more – you could have dozens of reasons to transfer money abroad. But how do you actually do it? And where are the best deals to be found?
These days, there are many more reasons to transfer money abroad than ever before. You might want to book a holiday villa or even buy your own property. You may need to make regular payments on a foreign mortgage, or pay regular house maintenance fees. Or you may source antiques and collectables in different countries.
Whatever reason you need to transfer money abroad, you not only want to find a safe and secure way of doing it – you need to find a way that gives you the best value for money.
And a key part of this of course is that you need to ensure you have the best possible exchange rate and minimum costs for your transaction.
Taking suitcases full of banknotes abroad really isn’t the safest of methods!
We take a quick look at the main ways of transferring money abroad, and weigh up the pros and cons of each.
Choosing the right one for you could save you a significant amount of money.
Bureaux de Change
While bureaux de change are useful if you need to get your hands on small amounts of foreign currency in a hurry, you’re likely to pay a commission and get a relatively poor exchange rate on your money.
If you aim to transfer larger sums of money abroad, don’t use bureaux de change – you won’t get anything like the best deal. You’ll also have to take custody of the cash, which can be extremely risky.
Banks
The main advantage of using banks to transfer money abroad is that they are safe, secure and generally reliable.
You can ask for money to be transferred directly into a foreign bank account, so you don’t have to worry about carrying large sums of money about with you.
All you need is the payee’s Bank Identifier Code (BIC) and an International Bank Account Number (IBAN), plus the same details for your own bank account.
It’s convenient too. You can organise the exchange in branch, or you can do it slightly more cheaply online. There’s only one problem – exchange rates.
Banks aren’t known for offering the most generous exchange rates on the market, so while you have peace of mind about the service itself you may pay more than you need for it.
Money Transfer Companies
The two best known money transfer companies are Western Union and Moneygram.
The basic model is to use the internet or a company branch to send money to a person in another country. The person simply takes ID to the relevant branch in their own country and picks up the money.
The main drawback is that this isn’t suitable for transferring large sums, and it doesn’t give the same peace of mind as transferring direct to a bank account.
And while Western Union, for example, does offer currency exchange services that provide bank-to-bank transfers, these are principally aimed at small businesses and corporations.
Currency Exchange Brokers
Currency Exchange Brokers offer all the benefits of banks, but tend to offer much better exchange rates.
That’s because brokers are currency specialists, allowing them to offer you a lower currency exchange margin rate – the additional rate you are charged on top of the interbank currency exchange rate.
Better still, currency exchange brokers don’t usually charge commission or fees, which means you can save costs on each transaction. These financial institutions will operate on a currency exchange margin rate, this is the margin they use to make their money rather than charge you a commission fee as you would perhaps get if, for example, you were changing holiday money at a bureau de change
These savings can add up to a lot of money if you regularly transfer money abroad.
The only real drawback with currency exchange brokers comes if you need to transfer smaller sums – most deal with transactions of £300-£500 upwards.
But if you need to transfer more than that, a currency exchange broker like TORfx should be your first port of call.
Otherwise you may end up paying out more money than you have to.