What’s the best way to transfer money internationally?

There are many reasons why people want to transfer money abroad. So what is the best and cheapest way to do it?

International money transfers are secure, but they can take days to process. And, if you’re not careful, the fees can soon pile up. Finding a specialist currency exchange broker can make things easier, and ensuring you compare your options and find the right provider for you can save significant money.

In this article, we will explain:

• How does an international money transfer work?
• What are the main options for money transfers?
• What is the cheapest way to send money abroad?
• Are international money transfers taxed?

Read more: Moving abroad: everything you need to know

This article contains affiliate links that can earn us revenue. Xe is our preferred currency exchange partner.

How does a money transfer work? 

If you need to send money abroad, then the first place most people look to do this is their home bank. But this can be very costly.

World Bank data shows that banks charge an average fee of 10.7% of the amount sent. This makes them by far the most expensive service for regular overseas payments.

All banks and money transfer companies charge fees, with differing fee structures. They all take different margins or mark-ups on the daily exchange rate between currencies. 

Unfortunately for us, these extra costs are not always communicated transparently.

Using an international money transfer services like Xe might be your best bet. Xe consistently offer bank-beating exchange rates, helping you to send money overseas to most countries in the world. 

The three main options for international money transfers:

1. Spot deals: In finance, “spot” just means “right now”. If you use the spot market, you are agreeing to pay whatever the exchange rate is at that particular time for the currency you’re sending. It’s not fancy, but it is simple.
2. Limit order: Here you can choose your preferred exchange rate in advance. And when the rate rises to that level, your funds will be transferred. If you are more flexible on when you need the money to arrive, this might be your best option. It’s also possible to set an expiry date for limit orders. So if your chosen rate doesn’t appear, you can start the process again.
3. Forward contract: Here you can lock in today’s exchange rate, if you think it’s particularly cheap. You can then transfer your funds using this rate at any point up to 12 months in the future. Usually, the price of a forward contract will be the same as for a spot deal. Be aware, though, that even if exchange rates get better for your currency in the future, once you have agreed to a forward contract, you are still obliged to send money overseas using the rate you’ve chosen.

Once you have picked the type of international money transfer you want, the process goes like the below.

Process of a money transfer 

1. Customer ID check. You will usually have to provide some form of identification to your service, like your name, address and date of birth, backed by a passport number or driving licence. Each country has different laws, however, and sometimes you may need to state the purpose for your international money transfer.
2. Lock in the exchange rate using a spot deal, limit order or forward contract.
3. Pay for the transfer, either by bank transfer or by debit card.
4. The currency is converted and sent out. 

With the best international money transfer services, you can usually pick how your recipient receives the funds – as a bank deposit, cash pick-up, home delivery, or direct to a mobile money account.

It’s always best to use an approved and established vendor that is overseen by the UK market regulator, the Financial Conduct Authority.

FCA-authorised payment institutions have to abide by a list of rules and regulations, and must offer specific protections for their customers.

If you use an unregulated company and it goes bust, it is likely there will be no way to get your money back.

If you are looking for a money transfer credit card, check out our independently rated top picks here.

What’s the cheapest way to send money abroad?

There are always fees and charges to pay if you’re sending money abroad. It’s not much fun, but it is a fact of life – both for a one-off payment and regular transfers. 

Brokers such Remitly or CurrencyFair will normally charge a flat rate per transaction. There is an option to pay a little more if you want the funds to arrive faster. 

With larger amounts, between £100,0000 and £500,000, service providers usually charge a flat rate with a percentage fee on top.

For example: I’m in the UK and I need to send £200,000 to Thailand to pay for my holiday apartment. With Wise, I will pay a flat fee of 84p along with 0.41% of the total sum (£200,000 x 0.41% = £820).

Xe, on the other hand, charges a fee for transfers up to £250. After this no fees apply, but since it doesn’t use mid-market rates you’ll need to ensure you’re getting the best possible exchange rate.

Are international money transfers taxed? 

You might also be asked to pay taxes on international money transfers. It depends on the country you are sending money from and to, and the purpose of the cash transfer. 

For example, if you are paying tuition fees for your child to study in another country, it’s unlikely that tax will be applied on top. Especially if your son or daughter is considered a dependant for tax purposes.

Lump sums could be considered a gift, though, and may have tax implications. 

The rules vary dramatically from country to country. So it’s always worth checking with an accountant to ensure you are not hit with an unexpected bill.

Options for sending money overseas

Whether it’s sending emergency funds to an overseas traveller, or paying for school fees or overseas property, it can be very confusing trying to find the right way to send money overseas.

Below, we outline options.

Regular transfers to one country

A specialist FCA-authorised remittance broker such as Xe could be your best option if you are planning regular payments from one country to another. They allow you to lock in an exchange rate for up to 24 months and automate payments via direct debit. It could be a good choice if you need to make mortgage, salary or pension payments.

Infrequent transfers under £20,000

FCA-authorised UK firms such as Xe consistently score well in online reviews for smaller international money transfers. You will have to set up an account first and get your ID verified, which can be done completely online.

Then all it takes is to finalise the transaction, usually by bank transfer but there are other methods available like credit or debit card. However, be careful with using a credit card because you could incur extra fees.

Transfers over £5,000

Specialist currency brokers are usually your best option if you need to send larger amounts of money — for example, if you are paying for property abroad. Again, using an FCA-authorised firm is key for security and peace of mind. 

The best option is to gather exchange rate quotes from providers and compare them side by side.

Even a tiny difference in the exchange rate offered can have huge financial implications. A rate that is just 1.5% better on £250,000 will save you £3,750, for example.

Xe has a dedicated team with various tools and transfer options to help you navigate the currency markets.

If the recipient doesn’t have a bank account

Some brokers, such as Xe, offer cash pick up or mobile wallet delivery options. So even if your recipient doesn’t have a bank account there is still a way to send money overseas.

You could also find out if there is a local branch where someone could pick up the money.

Ensuring safe and secure international money transfers

If you’re sending money abroad for the first time, it can feel daunting. But rest assured this is a secure process.

If you’re looking for tips to ensure your money arrives safely we’ve listed some below:

• Awareness is Key – Be sure to always confirm the legitimacy of the person or business receiving the money. This can include checking online reviews, verifying business registration details, and confirming contact information. Increasing awareness of fraudulent schemes helps protect individuals from potential losses when transferring money overseas
• Improvement in Monitoring – The rise in online fraud reported by Action Fraud during the pandemic has led to enhanced monitoring and fraud prevention measures
• Community Involvement – The data from Cifas showing a 78% increase in money mules under 21 underscores the importance of community and financial education to empower young people to avoid such exploitation
• Protecting the Youth – The identification of at-risk groups, such as out-of-work youngsters, allows for targeted interventions and support systems to prevent their involvement in financial crimes

How do I choose the best international money transfer service to send money abroad? 

The best international money transfer service for you may be different to the best one for your neighbour.

Everything depends on your situation: how often you need to send cash overseas, and how much you need to transfer, among other factors. 

If speed is of the essence, a spot deal may be your best option. For small, regular payments, you may want to lock in today’s rate with a forward contract.

Whatever your needs, always look for transparent services that show you exactly the fees you will be paying before you send money overseas, so there are no nasty surprises further down the line. 

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