Money Insider: Bank customers pay a high price for sending their money abroad
Friday 18 October 2013
New figures released this week show that high street banks' customers are getting a raw deal when it comes to sending foreign payments overseas.
The numbers show that in order to get the best deal for your money it is important to shop around, as even a small percentage difference in the exchange rate can result in considerable savings.
If you want to send some money abroad most people will automatically arrange the transaction via their current bank, but this can prove a costly mistake.
Unfortunately a lot of people are unaware that there are cheaper alternatives available and are confused by the combination of uncompetitive exchange rates and transaction fees levied by the banks. Even though some providers claim to offer a fee-free service the wide variation in the exchange rates used in foreign currency transactions often represent the major hidden cost to retail customers.
As well as looking at the exchange rate, for the man in the street the situation is further complicated as many banks charge an additional fixed fee on top.
The research highlights how much extra a consumer could pay if using their own bank to send the money overseas. The difference between the cheapest and most expensive option to send just $1,000 to the USA is more than most people realise.
The lowest cost was £631.71 courtesy of FairFX, closely followed by Caxton FX at £638.53. At the other end of the scale, the same transaction with Santander came to £670.64 and the most expensive, Western Union, charged £671.05, almost £40 more than the FairFX deal.
As a one-off transaction these sums may not sound that much. But when you consider thatpeople with property overseas or children studying and travelling abroad are transferring funds every month to cover costs, the annual savings could be in the region of £500 in some cases. It has been reported previously that up to 90 per cent of transactions are still conducted through the banks, so there is a huge amount of money to be saved if only consumers took advantage of deals from some of the new breed of online brokers such as FairFX and Caxton FX.
Next time you need to send some funds overseas remember there are other options to transfer money all over the globe that are cheaper, offer better exchange rates and give you the same level of security as banks.
Clydesdale and Yorkshire offer a Helping hand
With all the focus on the Government's latest Help to Buy initiative, it was interesting to see Clydesdale Bank and Yorkshire Bank throwing down the gauntlet with an excellent new 95 per cent LTV mortgage offer.
The interest rate for first-time buyers with a 5 per cent deposit has been chopped from 5.49 per cent to just 4.99per cent for a three-year fixed rate deal even though the bank hasn't signed up to Help to Buy. There is also no arrangement fee, plus a free valuation and £250 cashback.
With only NatWest, RBS and Halifax currently offering products via Help to Buy 2 it's good to see Clydesdale and Yorkshire grasping the nettle and going it alone without waiting for Government guarantees.
According to the latest HomeLet rental index the average rent in the UK (excluding Greater London) is £844 a month. By comparison a £100,000 mortgage at 4.99 per cent (25-year term) would cost £584 per month or £876 for a £150,000 home loan, so if tenants can get their hands on the 5 per cent stake the affordability of home ownership is now starting to make it a more realistic option.
Andrew Hagger is an independent personal finance analyst at moneycomms.co.uk
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