The pound has plummeted to lower than 1.15 up against the euro and 1.3 against the dollar, the smallest for years. So locating the currency exchange is far more essential than in the past. But this article is not about holiday money. It’s about people who need to send small sums regularly, and the ones making large one-off transfers, like investing in a holiday property. It reveals that some providers are great for large sums, but pricey for smaller transfers – plus it informs you to avoid PayPal, which became available particularly poorly within our price survey.
Consumers should first cut through any nonsense about “no fees” or “no commission”. Your key question needs to be: “After every one of the charges, just how many euros/yen/dollars etc am i going to get for X pounds?” To achieve this, check exactly how much you are offered versus the mid-market “interbank rate”, the rate used when banks trade between an additional. You can examine the live interbank rate on XE.com.
Secondly, you will be reasonably certian that the deal made available from your high-street bank is going to be pretty lousy, unless you happen to be “premier” type customer transferring large sums.
James Daley of Fairer Finance says: “Almost all major banks charge big money for transferring money overseas, and give an inadequate exchange rate to boot. The good news is that a variety of alternatives give you far better value.”
Our third golden rule is that, if transferring a sizeable sum right into a foreign account, first send a little sum and check this has been received, all the to make sure you have sent it off to the right account as everything else. Only then in case you send the entire amount.
Virtually all major banks charge lots of money for transferring money overseas, and provide an inadequate exchange rate to boot
James Daley, Fairer Finance
Finally, remember there is relatively limited protection should things fail. The currency brokers can be “authorised” through the Financial Conduct Authority (FCA) or maybe “registered”. Authorised firms need to keep clients’ money outside of the company’s own funds. When a firm is merely registered using the FCA there’s a danger each of the money is in the same pot and may be lost if the company went bust.
“Even in case a firm is FCA authorised, it’s crucial that you realize that there is absolutely no defense against the Financial Services Compensation Scheme within this sector,” says Daley. “So in case a firm goes bust due to a fraud, there’s still the opportunity that you won’t get a refund. However, the risks if you’re employing a big brand are fairly small.”
During 2010, Crown Foreign Currency Exchange, operating out of Hayle, Cornwall, went bust, leaving 3,000 people owed £20m. It used new customers’ cash to settle existing clients, as well as fund the purchase of a high end home. Three people in the scam are already jailed.
We obtained quotes for moving £200, £2,000 and £150,000 into euros and dollars. We conducted the test on 29 July once the pound was fetching €1.19 and $1.32 respectively, but sadly it offers since fallen further.
Perfect for small sums When transferring £200 we found UKForex best for euros and TransferWise best for dollars. UKForex is FCA authorised as an alternative to registered, and is also a subsidiary of an Australian group, OFX. TransferWise is a peer-to-peer service (see below), headquartered in London and run by Estonians. Investors in the industry include Richard Branson.
Worst in this particular bracket were MoneyGram and NatWest, which goes to show reasons why you shouldn’t automatically use well-known names. For £200, NatWest will give us only $229.31, in contrast to $260.94 from TransferWise.
Best for mid-size sums When transferring £2,000, the Currency Account (for euros) and TransferWise (dollars) were best. The Currency Account is a somewhat new and small company, formed in 2014, which is authorised with the FCA. It describes itself being a “hybrid” peer-to-peer plus direct market access company.
Great for large sums We checked rates on moving £150,000, a sum where you will be seriously upset if something went wrong. Again, the Currency Account came top for euros, though there seemed to be hardly any between it as well as the other brokers. HiFX came top from the bracket for dollars. HiFX was established in 1998 and is amongst the largest brokers, having transferred around £100bn consequently.
Currency brokers There are loads of currency brokers or money transfer specialists. Such as MoneyCorp, Currencies Direct, CaxtonFX, TorFX, HiFX, UKForex, FairFX, Azimo and Xendpay. They just about all advertise “bank beating” rates, but how will they compare against each other?
A handful of currency comparison sites can be purchased, nevertheless they won’t necessarily locate the best deal. If you’re looking for the best value for your money you will be happier going to individual companies, getting a quote and asking how much time the transfer will take. When you see a business offering a good deal, have a look at its reputation by utilizing FXCompared, TrustPilot or possibly a general Google search.
Established firms are usually, however, not always, by far the most reliable. Some smaller brokers and “disruptive” web platforms temporarily stopped trading in the EU referendum aftermath.
Peer-to-peer services TransferWise is just one of a new breed of peer-to-peer operators which remove the banks and brokers by providing a web-based meeting location for people seeking to buy each other’s currencies. You don’t send your money directly, rather to the currency exchange firm which then passes it on.
“Our exchanges are derived from free or extremely low-cost local banking accounts transfers. We don’t send money overseas, so can remove the crazy fees that banks charge consumers,” says Taavet Hinrikus, co-founder of TransferWise.
Another peer-to-peer platform, CurrencyFair, works in the similar way, even though the exchange rates are set by its users. In cases where there are no customers providing a good rate to your exchange, CurrencyFair will part of and match with you. The web page claims customers typically pay .35% in the amount exchanged as well as a fixed €3 transfer fee.
If you want to pay in cash or transfer money quickly, Western Union and MoneyGram have branches around the high-street – however services are certainly not cheap and simply ideal for small amounts. And while the businesses themselves are legitimate, they are often made use of by scammers, so be wary of strangers looking for payment using this method.
PayPal may make it easier to deliver money overseas, but was the most costly option by 50 percent the Guardian calculations. It whacks on the hefty conversion fee if you would like pay someone in another currency.
This article was amended on 22 August to improve the year when the Currency Account was set up. It ought to have said 2014, not 2011.
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