You are here: Home - Saving & Banking - Understanding -

Transferring money abroad: Is your bank ripping you off?

Written by:
High street banks charge high prices for international money transfers, yet execute 90 per cent of transactions. Your Money looks at the alternatives on the market.

You can hop on a flight to Spain tomorrow for less than £100, but getting your money to a bank account there – to pay the mortgage on your holiday home, for example, or finance your child’s education – can be a pricey pursuit.

Research by Andrew Hagger of Moneycomms shows high street bank customers are paying far more – up to £53 on transactions of £1,100 – than they need to for international transfers.

Hagger explains: “Consumers simply don’t appreciate that there are cheaper alternatives available. They’re also confused by the combination of uncompetitive exchange rates and transaction fees levied by the banks.”

A quick look at the websites of the major banks reveals the average standard fee for transferring money abroad is £25 a pop.

But the costs don’t end there. Often banks will offer exchange rates above where the foreign exchange (FX) market is actually trading, allowing them to skim money off the top of your transfer in addition to collecting their fixed fee.

Taavet Hinrikus, founder and executive chairman of online money transfer service TransferWise and an expat himself, says it doesn’t have to be this way.

“In international currency exchange, banks have found an area where they can very easily add hidden fees. They’re milking money by taking advantage of their customers,” he says.

TransferWise, for its part, will transfer your money at the mid-market rate – the true rate you will find on Google, to which Hinrikus says banks often add three to five points – for a completely transparent fee of £1 for small transactions.

Transfers over £200 are subject to a clear pricing structure, and you are told at the earliest stages what the total cost breakdown will be.

With no complex online forms, SWIFT codes or PINsentry devices involved, TransferWise claims to offer a simple, easy to understand alternative to high street banks. It, and services like it, also make economic sense.

According to research by Moneycomms, getting €1,200 to an account in Spain on 18 February 2014 cost £999.25 through online specialist FairFX. Going through HSBC increased the cost to £1,020.02, while through Santander the transaction hit £1,039.74. While the differences may seem small, anyone with property overseas, family in other countries or jobs abroad could be paying these additional costs every month.

The head of HSBC’s FX department was unavailable to discuss how the bank determines exchange rates and fees, though a spokesperson did note that a new fee structure, which came in on 2 March, reduced fees to just £4. If you’re transferring funds to another HSBC account the transaction is now free.

Hinrikus, whose company celebrates its third birthday this month, says: “The banks are hiding the true cost of what they do. I’ve met many bankers over the last three years, and the first thing they always ask me is why we don’t charge more. The answer is that we don’t have to. We’re not greedy.”

While some banks do appear to offer reasonable exchange rates on mainstream currencies like dollars and euros, rates on lesser used currencies are far less competitive, according to Hagger.

Moneycomms found the cost of transferring 30,000 Czech koruna to the Czech Republic varied by as much as £44.65. While FairFX would complete the transaction for £911.16, at Barclays the bill came to £955.81.

As an American expat, I pay a $213.36 student loan bill every month that can only be paid out of a US bank account. Getting the money there today – 8 April 2014 – through Barclays would cost £133.04 plus a £25 fee; TransferWise will do the exact same transaction for £127.54 plus a £1 fee and a rate buffer deposit of £3.94, the unused portion of which I get back.

Exchange rates fluctuate constantly, but using TransferWise will save me approximately £354 this year.

Comparative costs of international transfers

Provider  1,200Euros  1,500 US Dollars  30,000 Czech Koruna  5,000 Polish Zloty  1,500 Swiss Francs 
FairFx £999.25  £910.14  £911.16 £1,001.06  £1,021.10 
Caxton FX + £4.09 + £3.66  + £4.59  + £5.69  + £5.24 
HiFX  + £10.67  + £7.24 + £8.86 + £7.92  + £8.10 
MoneyCorp + £18.41 + £16.24 + £16.63  + £19.37  + £17.67 
HSBC + £20.17  + £24.49  + £33.38 + £35.59  + £35.68 
NatWest + £23.89  + £19.52 + £38.76 + £36.34  + £35.56 
Post Office  + £26.65  + £22.12  + £25.86  + £27.17  + £28.58 
Halifax + £28.74  + £26.12  + £27.28  + £28.95  + £27.70 
Lloyds + £29.24  + £26.62  + £27.78 + £29.45  + £28.20 
Nationwide BS + £31.45  + £31.45  + £31.50  + £33.51  + £31.93 
Barclays  + £36.07  + £44.69  + £44.65  + £47.82  + £46.80 
Western Union  + £36.29  + £6.48  + £29.63  + £36.76  + £37.87 
Santander  + £40.49  + £40.23       N/A  + £43.70 

+ £41.92

Research conduced by on 18 February, 2014

Tag Box




Financial fitness

There are 1 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.
  • Of course banks and classic money transfers operators are ripping you off !
    The idea is to use a money transfer comparison tool such as which makes you compare all the solutions in real-time to find the cheapest, according to your needs (which country are you sending money from & to ? How much do you want to send ?)
    They will find you in a 100% transparent way the best solution

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co... Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
VCT fundraising hits eight-year high

The amount of money invested in venture capital trusts (VCTs) reached an eight-year high in the 2013/14 tax year, figures...