If you regularly make overseas money transfers, ask yourself this: “Am I doing it the best way for me and the recipient?”. If you’re not sure, read on…
Expats probably send money overseas more than any other group of money transfer customers. The most common reasons for making an international money transfer include paying for a property purchase, paying for children’s overseas education, paying a mortgage on a property in another country, paying for an elderly relative’s care, and topping up a child’s gap year “slush fund”!
Sometimes you have to make the transfer straightaway – “Hi Mum, I’ve used up my monthly allowance and haven’t got any money to buy a train ticket home” – while other times you can plan ahead, as with mortgage payments.
Whichever it is, immediate or long-term, it’s worth understanding the best and most secure ways to send money overseas and which types of companies will do it for you.
There are plenty of companies vying for your business. The three most commonly used options are banks, foreign exchange (FX) brokers and high street transfer firms (like Western Union).
Key criteria to decide on
In order to choose which is the best option for you, consider a number of factors, including:
- How much you want to send
- How often you want to send it
- How quickly it needs to be sent
- How the person you are paying wants to receive it
- What the fees are to make the transaction
Deciding on these criteria will affect which service is right for you. Some services are designed to transfer the money quickly (often at higher cost), others are designed to get you the best rate and may need some forward planning.
Banks are secure but don’t usually offer the best exchange rate. However, some banks will offer a good rate if the transfer is to an account with the same bank.
If you are making a large payment, such as purchasing a property, regular payments, or moving a large lump sum overseas, foreign exchange brokers are generally considered the best option – if you’re not in a hurry. They will shop around for the best rate for you. But for this you need time on your side so that the broker has time to look for you. A good broker will offer to set up a rate alert for you. You’ll receive notification that the rate is in your favour so that you can decide whether to make a payment or wait.
If you have to make a very speedy payment – perhaps you have a child on a gap year who has lost their wallet and needs money now – you’ll need to make an instant transfer, via a company like Western Union or the UK Post Office. The recipient simply walks into the location receiving the money, presents some ID and walks out with the cash. The exchange rate will be poor.
Paying school fees
In ‘How to get the best currency rate to help fund an overseas education’, Rowan Tremethick explains how an FX broker can make a difference:
“If you have several months before you need to pay school fees and are worried about exchange rate movements, you may want to use a ‘forward contract’ to lock in a favourable exchange rate for up to two years. You can then buy foreign currency at the rate you saved, even if the market is much weaker.
You should also ask a broker to run you through ‘stop loss’ and ‘limit orders’, which prevent you from losing money while you wait for a better exchange rate to come along.”
If you’re simply buying something from an overseas online business, a credit or debit card may be the most convenient way of paying. Avoid sending cheques overseas, though, as your bank and the receiving bank are likely to charge you for the service, and it’ll be very slow.
So, the key things to think about before transferring money overseas are time constraints and how often you want to make an exchange.
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