There are a number of ways to transfer money abroad.
Some of them are cheaper than others.
Ultimately, there are a few things that will affect the cost of your transfer:
- The currency you are sending and receiving
- The country you are sending to
- The type of transfer you require (bank transfer, cash, mobile money etc.)
It’s hard to say what the cheapest way of transferring money is without knowing these things first.
Instead, I’m going to give you the cheapest ways to transfer money abroad on average.
I’ll also talk about the costs of international transfers and how to get the best deal.
What is the cheapest way to transfer money?
In a nutshell, the cheapest methods are:
- Currency Brokers
- Money Transfer Apps
Both types of companies provide low cost international transfers.
This is in the form of low transfer fees and great exchange rates.
However, they each provide very different experiences for the customer.
You’ll have to work out which type is right for you.
Essentially, Currency Brokers provide an over-the-phone service.
Money Transfer Apps on the other hand, make you do all the work yourself on an app.
When choosing a provider for an international transfer, there is often one key cost that is overlooked.
This is the "opportunity cost".
Only Currency Brokers can help with this.
I’ll explain what this means in the next section, and why it’s very important.
Further down, I’ll also explain why you definitely should not use your bank.
What are the costs of an international transfer?
Let’s cover the different costs of an international transfer and what they mean.
Transfer Fees
This is pretty self explanatory.
You pay a fee per transfer, which is either a fixed amount or a % of the transfer.
Most currency brokers won’t charge a transfer fee if you transfer more than £1000.
However, you may have to pay £10 - £20 if it's below that.
Meanwhile, Money Transfer Apps will usually charge a fee no matter the amount.
Each provider will have a different fee structure:
Even though XE doesn’t charge a fee compared to Wise, they might be more expensive.
This is because of the exchange rates they provide.
Exchange Rates
This is where the companies make their money.
For any currency pair, e.g. GBP/EUR, there is one central rate, called the interbank rate.
This is the best possible rate you can get at any one time.
Except, you can’t get it. Only banks can.
Not even brokers can buy at the interbank rate.
Instead, banks will sell currency to the providers at slightly below the interbank rate.
This rate is called the “wholesale rate”.
The banks will then pocket the difference between the two rates as profit.
The money transfer providers will then set their own rates for customers, the “retail rate”.
The bigger the difference between the wholesale rate and the retail rate, the more money the company makes.
And therefore, the more it’s costing you.
You will never be offered the wholesale rate as a customer.
So, you’ll have to compare the different retail rates you get with other providers to see who comes out on top.
Opportunity Cost
As I mentioned before, this is often overlooked.
Basically, it’s the cost for you of timing your exchange poorly.
All exchange rates move every 3 seconds.
The main thing that makes the rate move is news.
For example, on May 5th 2022, GBP/USD dropped from 1.25 to 1.23.
This was because the Bank of England announced that the UK economy was expected to slow.
Thus, investors lost confidence in the Pound and sold their holdings, weakening the rate.
This is one example of news moving the markets.
It happens multiple times a day across all currencies.
Keeping an eye out for any upcoming announcements or news can help you get an idea on how the rate will move in the future.
This gives you a better opportunity to time your exchange better, and get the most for your money.
But let’s be honest, who has the time or the interest to be watching the news like that?
This is where currency brokers come in. They will do it all for you.
They watch the news and markets all day every day.
They’ll keep you up to date and give you a call when it’s the best time to make the exchange.
This is something that Money Transfer Apps can’t do, as there’s no one to speak to.
Cheapest ways to transfer money internationally
Let’s go into some detail about what these methods are and if they’re right for you.
Money Transfer Apps
As technology advances, so do your options for money transfers.
These kinds of apps are still new to the market.
For example, Wise (formerly TransferWise) was only founded in 2010.
You sign up online and log in to either an online platform or mobile app to book your transfers.
There is no one to speak to for immediate help.
And even then, these types of companies aren’t known for their cutting edge customer support.
When sending large amounts abroad, it’s important to have someone there to speak to.
That’s why I wouldn’t send more than £5000 with a money transfer app.
However, the technology they provide is excellent.
They’re a great modern solution for small payments.
If I had a small transfer to make, I wouldn’t hesitate to use an app like Wise or XE.
You’ll get a great rate of exchange, and low fees (if any).
What makes them cheap?
- Some of the best rates
- Low to zero transfer fees
Currency Brokers
For anything over £5000, I’d recommend a currency broker instead.
This is because of the customer service they provide.
If you want to make a transfer, you give them a call and they’ll run through it with you.
Some even have their own mobile apps too, so you can get the best of both worlds.
It can get stressful when transferring large amounts.
Imagine having all of that money leave your bank account and having no one to speak to…
In a nutshell, that’s why they’re better for £5k+.
You can pick up the phone and have answers to your queries in minutes.
Compared to “submitting a ticket” or trying to communicate via an online chat portal.
With companies like Key Currency, they’ll answer their phones within 5 seconds.
No holding or wait times.
For me, it’s a game changer.
What makes them cheap?
- Very low exchange rate spreads
- No transfer fees
- They can help you time your exchange
Why you shouldn’t use your bank
There are lots of reasons:
- Terrible exchange rates (4-6%)
- High transfer fees
- Poor customer service
- The operatives often have little knowledge of transfers and markets
Most of the time, people don’t often think past their bank and what the other options are.
Then they get stung by the costs and begin to wonder why it’s so expensive.
So the fact that you’re already here reading this article is the first step.
You’ve already saved yourself a lot of money by not using your bank!
If you’re thinking about using your bank because they’re “safe”, or for the “peace of mind”... don’t.
Most companies out there are fully regulated by the FCA.
This gives you the same level of protection as a bank would give.
To make it easier for you, all companies listed on TopMoneyCompare.com are fully regulated.
How can I reduce the cost of my transfer?
To get the best deal possible, do these two things:
- Time your transfer
- Compare your rates with other providers
Performing your transfer after some positive market movement can net you a lot more money.
Especially if you’re transferring £100k+.
Small percentage increases mean thousands extra for you.
Comparing rates is important, too.
It allows you to find the cheapest provider out there.
Comparing can be the difference between getting charged 3% and getting charged 0.5%.
That’s a difference of £5000 on a transfer of £200k.
On top of a well timed exchange, you’ll be laughing.
Summary
You’re here because you want to know how to get a cheap transfer.
No money transfer is free. There’ll always be some kind of cost.
The cheapest methods are currency brokers or a money transfer app.
Brokers provide an over-the-phone service, focused on keeping the customer happy and safe.
Apps make you do it all on your mobile phone, with no one to speak to.
That’s why I recommend using a broker for transfers bigger than £5k.
You’ll want someone to speak to if you have an issue.
Anything under that amount, use a money transfer app.
They’re a great way of making small, quick and cheap transfers.
Once you’ve picked your provider, it’s now time to get the cheapest exchange possible.
You do that by comparing your rates and timing the exchange.
By combining all of the tips in this article, you’ll get a great deal on your transfer.
Just below, you can get a quote and compare rates from the industry-leading providers.
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