Sending money abroad? Here’s how not to get ripped off
In the last few years, the options for overseas cash transfer have exploded.
But, while this has often made it cheaper, it has also made it harder to know if you’re getting the best deal.
Our four-step guide is here to help (to receive money-saving tips every week sign up to our free newsletter by entering your email into the box at the top).
Step 1: Know what you want
The best way to spend money abroad depends on what you are looking for. There are a whole host of options and which one is best for you depends on the amount you wish to send, the speed you need it to arrive in and how often you will be doing transfers.
High-street money transfer firms such as Western Union offer fast services, allowing your cash to reach its intended destination as fast as possible.
But these companies often charge hefty fees or offer very unfavourable exchange rates.
If speed is less of a concern, Paypal and other online payment systems are a cheaper option. It’s true, payment through these companies can often take up to four days, but fees are typically lower, so it’s worth it if you can afford the wait.
For ease and reliability, a high-street bank might be the best option. Most banks offer cash transfers for account holders, but some are more expensive than others.
For instance, if you have a HSBC Premier and Advance current account, you can transfer money through their online banking system for free.
If not, you’ll have to stump up £4. Other banks can charge over £20.
If you are planning to send money abroad regularly, our advice is to set up a branch with your bank overseas, cutting your transfer costs.
Step 2: Know where the charges are coming from
When wiring money from abroad, you will always be hit with some sort of charge – hidden or otherwise.
The most upfront levy is through commission fees. These are clearly visible and easy to compare.
However, many high-street money transfer places will offer customers so-called “commission free” transfers.
Be on your guard: these companies are not moving your money abroad out of the kindness of their heart.
Rather, they make their money through slapping their own margin on top of the market exchange rate.
By offering unfavourable exchange rates, they are still charging fees, just indirectly.
Don’t be fooled by promises of commission free services – make sure you know how the exchange rates compare.
If you feel you’ve been charged unfairly, get in touch with A Spokesman Said through our free online complaint tool. We’re in your corner.
Step 3: Comparing exchange rates
Make sure you compare the rate offered by the money transfer company against the market exchange rate.
A raft of websites offer this service; one we like is XE.com.
The market rate should serve as your starting point to measure others.
The rate you will be shown will be much more favourable than that being offered by any money transfer company, which will have placed a margin on top of the market rate.
Your best option is to shop around. Compare the prices of different firms and try to find which one is charging the least.
Always remember that the place with a more favourable exchange rate is often more likely to have some sort of fee hidden somewhere.
Step 4: Staying safe
Although money is now sent electronically through the click of a button, it’s still possible to lose your cash when sending it long distances.
The main threat is if the company you’re using to transfer your cash goes bust.
Some places are safer than others.
High-street money transfer companies are divided into two categories: “authorised” and “registered”.
Authorised transfer companies must separate your money from their own when they close for the day.
Registered transfer companies, on the other hand, make no distinction between whose money is whose while a transfer is in process.
This is an important distinction. If you use a “registered” transfer company and they go bust before your transfer is complete, you’ll lose your money. With an “authorised” company, you should get your money back.
All transfer companies that deal with over £2.5m per day must be authorised.
These are your safest bet. However, it really is a bet. Smaller companies that are only registered are often more likely to offer you a better exchange rate or commission fee. Which one you go for depends on whether you prioritise safety or a bargain.
Have you transferred money abroad?
Let us know how you found it in the comments section below.
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