A guide to sending money overseas

Transferring money to other countries can be very costly – but it doesn't have to be.

The world is an ever smaller place these days. An increasing number of people are travelling overseas in pursuit of everything from sunshine to higher earning potential. And moving abroad, investing in overseas property or even having family in another country often means having to send large amounts of money across international borders. Around 190 million people sent more than £155bn around the globe last year, according to recent government figures.

However, these kinds of transactions are varied and complicated. Fees, charges and punishing exchange rates can erode your hard-earned cash by tens, hundreds or even thousands of pounds every time you transfer money, slashing the amount you send or receive.

Small print

"Traditionally, we use our local banks to transfer money," says Mark O'Sullivan of currency broker Currencies Direct, "but purchasing €150,000 from a high street bank is up to £6,861 more expensive than via cheaper alternatives. "In fact, this seems to be one of the ways banks are now clawing back the money they lost in the battle over unfair overdraft charges," he says. "In the last 12 months, the average transfer fee has increased from around £20 to nearly £30, with some charging up to £40 for an international transfer."

The cheapest high-street one-off transfer fees among banks include Alliance & Leicester, at £16 per transfer. If you are moving to one of HSBC's list of 21 "Worldpay" countries, which includes Hong Kong, Australasia and the US, you'll be charged £15 for amounts over £2,000. Nationwide and NatWest charge £20 to move money internationally, although with the latter it costs a further £10 to send euros to the EU.

Customers are also hit by unreasonable exchange rates, he adds. High-street banks and building societies charge customers a tourist rate, often 3 or 4 per cent worse than the rates at which the banks sell currency to each other. The bank then pockets the difference between the value they bought the currency at, and the value they sold it on for.

"Many banks also charge a fee of up to 1 per cent of the sum to receive the money in your country of choice," says O'Sullivan, "It is another hit that many people are unaware of, often because the UK-based bank staff know nothing about it either. It can be a nasty shock when the money comes through at the other end with yet more deductions."

Large sums

Most money-transfer outfits will charge a flat fee to transfer cash, which works out as a tiny fraction of large sums. Here, it is the exchange rate that could do the damage, warns Emmanuel Addy of independent money transfer price comparison site www.sendmoneyhome.org. "For high-end transfers of several thousand pounds, or regular payments such as pensions or mortgages, it pays to go for the best possible exchange rate – the one closest to the Interbank rate, he says. "Overseas foreign currency exchange specialists will be able to offer extremely competitive exchange rates without charging a fee or commission."

Foreign exchange brokers will offer rates within around 1 per cent of the Interbank rate, though those rates constantly change, and a good deal from a specific broker often depends on the destination country. It is essential to be clear about the amount to be sent, whether it's a one-off payment or part of regular payments, and the country the money is being transferred to.

Companies such as Sterling Exchange, Currency Solutions, Online FX, Global Currency Solutions will all be able to walk a customer through the process and answer their questions.

Foreign exchange brokers will offer rates within around 1 per cent of the Interbank rate, though those rates constantly change, and a good deal sometimes depends on the destination country. But currency brokers are rarely household names. They are not obliged to be registered with the Financial Services Authority, and may not offer you the same level of protection that FSA-regulated banking services afford. Check their credentials with HM Revenue & Customs, and get quotes from several brokers before you commit.

Small sums

The rule of thumb when it comes to transferring more modest amounts overseas is to send as much as you can as infrequently as possible, reducing the number of times you get hit for fees. Sending £100 to another country can range in cost from nothing to as much as £40, according to Sendmoneyhome.

When it comes to online transfers, via PayPal or Transferz , the exchange rate may not match up to the currency brokers, but it is free to send money online via PayPal in a choice of 18 currencies and Tranferz.com charges a flat fee of £7 regardless of the amount sent, a far better deal than going to your local bank.

"There are several companies that operate globally, such as MoneyBookers, MoneyGram or iKobo, who also offer better rates than the big banks," says Addy. "These are anywhere between 50p and £8, again depending on the method of transfer and the country the money is being sent to. And these methods tend to be a lot quicker than banks."

But if you really are convinced by the virtues of the banks, look for those with international accounts, or national banks in the country you are sending the money to which have UK-based branches. "These banks, such as Icici Bank and Bank of Baroda who serve the Indian community, often transfer money for free if you are an account holder."