With bank transfer charges, currency fluctuations and a myriad of ways to manage expat finances, dealing with foreign exchange and money transfers across borders can seem complicated.
This comprehensive guide aims to make moving money overseas simpler for expats.
Our tips explain how international money transfers work for expats, the catches to look out for and how to choose the most financially efficient options.
Table of Contents
Types of International Money Transactions
As an expat, you’re sure to need to transfer money abroad at some point. The most common reasons for needing to make an international payment include:
- Paying for travel or accommodation in local currency
- Sending cash overseas as a gift or to support relatives in another country
- Transferring money to an overseas bank or savings account
- Trading with suppliers in a different state, or with a foreign currency
- Regular payments as instalments, or made to family members
Of course, once you become settled and establish residency in another country, you’ll have all sorts of other considerations that will involve cross-border payments – think about:
- Buying a property
- Purchasing a car
- Managing a pension
- Paying day-to-day bills
How To Choose Foreign Exchange Service
The primary considerations include the obvious, such as security. If you’re accessing your hard-earned savings, the last thing you want is to risk choosing a currency transfer service that is less than reputable and find that your funds never arrive.
Other things that might influence your decision are:
- How quickly a transfer will be completed
- The stress of dealing with security dongles and fiddly approval systems
- Whether you’ve heard of the service provider before, and consider them credible
- What exchange rate is on offer
- The fees attached
Most high street banks offer international payments; in fact, you can often arrange these through your regular debit account.
However, standard transfers can take several days, and you may lose a chunk of change in high transfer charges and processing fees – as well as a non-competitive exchange rate.
It is, therefore, crucial to take a bit of time to understand foreign currency trades and how booking exchanges work, and perhaps save yourself a lot of money in doing so. But first things first, you’re going to need a bank account to send a transfer to.
Setting up a Local Bank Account
One of the first things you’ll need to do before you even consider transfer options is to set up a domestic bank account in your new host country.
You’ll need this for just about everything, from receiving pay, buying your groceries, making income tax payments, proving your residential status, demonstrating your income for tenancy checks, and receiving income from overseas.
Some banks will need you to have a permanent address before they can set you up an account; in which case, you’ll usually need to pay a deposit of between one and three months’ rent from a UK account.
This is a bit of a catch 22. Still, the best way to deal with this is to seek a cost-effective one-off money transfer option from an international payment provider or even create a foreign payment transaction with your British banking provider to overcome this initial hurdle.
Once you have paid a deposit and can move into your new property, you have the fixed address you need to register with a local bank.
Having a current account matters, and not just for transferring savings, but because in most states you’ll have to have a domestic bank account to set up regular payments – and many utility providers will want bank details before you can do things like:
- Connect a broadband account.
- Register a local mobile phone.
- Install utilities like gas and electricity.
- Sign up with a water services provider.
It is wise to leave your UK account in situ for the time being. This helps if you have any residual financial obligations in the UK and makes it a lot easier if you go back home for a visit without having to worry about trying to pay for things with an overseas bank card.
Choosing An Overseas Bank Account
One of the complications for expats can be knowing which bank to choose – particularly if you are not familiar with any of the local banks.
Some tips for choosing the best bank in a foreign country are:
- Speak to your UK bank to see if they have a presence or tie-up with a bank in your destination country.
- Some banks such as HSBC and Barclays operate in dozens of countries, and often have an option in your new home and can help with setting it up
- Look for brands you are familiar with, or those who have the most extensive presence in the area – and check them out online to ensure they are not rogues
- Research and consult expat forums to see which banks they recommend, and those that are most experienced in dealing with expat clients
- Choose a bank who has a local branch, as this will make it easier to set up a new account if you can pop in with your ID.
- If you need specific products or types of account, it may be worth consulting a financial advisor to ensure you choose a bank which caters to your requirements and offers competitive fee structures.
Transferring Cash Abroad
Now you have a local bank account you’ll likely need to transfer some of your savings.
There are lots of options when it comes to transfers, but it is well worth taking the time to shop around.
Most services charge rates as a percentage of the amount transferred or as a fixed fee. If you compare them, you’ll find a significant difference.
If the charges are a percentage, then the larger the value you wish to transfer, the higher the cost. This is usually a percentage mark up, on the exchange rate; so, don’t be suckered by transfer services claiming to have ‘zero fees’ or ‘no commission’ – they all do, it’s just rolled up with the exchange rate.
Some transfer services will offer you a more attractive exchange rate, the larger the transaction.
Again, you should shop around and compare a few transfer services to make sure you’re getting the best deal – and using your regular bank might be the most expensive option.
Another point to consider is that you can ‘pre-book’ currencies. This means that you hedge your bets on whether either currency is likely to fluctuate.
For example, if you know you’re moving overseas on, say, September 1, and want to transfer a chunk of your savings into a local bank account, a week later on September 8, you can take a look at how the respective currencies have performed.
If they are looking stable and healthy, then you’ll likely get as good a deal on that date as at any time, but if they are rising or falling rapidly, or fluttering to and from, most transfer companies will allow you to book a fixed rate, provided you know:
- What date the transfer will need to take place.
- How much you wish to transfer.
- From and into which currencies.
This is a great way to avoid losing out if a currency is predicted to nosedive in value.
The best way to compare is to ignore the exchange rate and charges and check how much will hit the account.
Choosing The Best Money Transfer Provider
You’ll find thousands of money transfer providers online; some of the most popular and indicative mark-ups include:
- TransferWise: 0.5% exchange rate mark-up
- XE: 0.5% – 2% exchange rate mark-up
- OFX: 1.5% exchange rate mark-up
- MoneyGram: 4% – 5% exchange rate mark-up
Each service has pros and cons, so the lowest fees don’t necessarily translate into the best service. This depends on how much you wish to transfer, and from what sort of account.
For example, if you want to transfer physical cash, you’ll need a provider who offers cash pickups from a local branch. Many only cater to bank transfers and don’t deal with cash transactions.
Some providers allow you to send money from any account, including from a credit card. Others will only manage bank transfers from savings or debit accounts. Others have a minimum transfer value, often in the region of £1,000.
Fee structures also vary; charges can be made up of:
- Delivery fees – from anything like £3 to £25.
- Flat rate transfer fees.
- Exchange rate mark-up fees, whether other charges apply.
- Credit card processing services, typically 3% – 5%.
- Currency withdrawal charges.
Speed is also a consideration since you’ll want your money as quickly as possible. This also varies significantly between providers.
You will find transfer fees promoting a 24-hour turnaround and others that take five working days.
Usually, the longer the transfer speed, the lower the costs as providers are using cheaper transaction methods, and sometimes even hang onto the cash for a day or two which accumulates interest while your transfer is in progress.
International Online Banking
As with UK banking, it is convenient to use an online banking service with your overseas banking provider. This makes it simple to pay bills, buy everyday essentials with your bank card, and keep an eye on your budget.
Most larger banks offer free apps or mobile optimised websites, so you can check on your account balance, send payments, or review your spending from a smartphone or tablet.
Online banking is also the quickest way to send money back home if you need to.
Expat financial advice firm de Vere Group also offers a mobile app, Vault, which moves money in up to 27 major currencies, for instance. The app is aimed at expats and regular travellers.
Even if you’re using a separate transfer service, you can set up the transaction by making instructions through your online banking service to save having to visit a branch in person.
If you’ve kept your UK bank account open, which is worth doing at least in the interim, you should maintain an online account there too for ease of use.
Read more about using Fintech for Expats here
Whether you’re a new expat or relocated years ago, disasters do happen and having an emergency cash stash or a back-up credit card that you only use in an urgent situation is a good idea.
Moving abroad can be extremely exciting, but also nerve-wracking and if you don’t have a firm grasp of the local language, even just the assurance of having an emergency back-up can take a weight off.
For example, if you need to fly back home urgently, lose your wallet or have a problem with your accommodation, having a separate card or a stash of cash means you can deal with the problem or order replacement cards without needing to panic.
If you’re moving overseas, you’re going to need to get used to a foreign currency.
It isn’t always easy to keep track of the exchange rate, but you need to know how much you’re earning and how much you’re spending so you can sustain your expat lifestyle and live within your means.
Currency conversions can be as complicated or as straightforward as you make them – there are lots of apps available to help with budgeting and understanding currency equivalents.
Indeed, some of the international payment providers mentioned above offer these sort of apps, so you can quickly tap in a value if you’re out shopping, or considering moving to a new rental, and immediately see what that converts to in Sterling.
Budgeting For Expat Taxes
Many expats will take up work in their new host country – unless you’re fortunate enough to be relocating to enjoy retirement in the sun.
That means paying local taxes, which vary significantly between countries.
If you’re working for an employer through a PAYE scheme, you might be paid net of taxes and social security contributions – in which case, your budgeting becomes a lot easier.
However, many states have blends of federal and local taxes, some of which might be deducted from pay at source, and others which must be paid separately and might require you to submit a tax return.
As with UK National Insurance Contributions, it is also vital to understand how social security works.
You’ll need to register for state healthcare as required and ensure you’ve made the right contributions to have access to all sorts of benefits, such as:
- Rights to state healthcare.
- Access to local pension schemes on retirement.
- Benefit systems.
- Public education programmes.
If there are any complications, such as having dual residency or needing to pay taxes as a tax resident in both the UK and your new country of origin, you also need to be aware of double tax treaties to make sure you claim tax refunds where they apply.
In some cases, and depending on your income level and assets, using a professional financial advisor who is experienced in expat taxes is the most cost-effective solution since it means you know what you are liable to pay.
When you expect to have to pay direct tax contributions, or you are self-employed or working as a contractor, the best option is to have a separate savings account as well as your usual current account.
Transferring a proportion of your earnings into a savings account each month means that you’ll be able to pay your taxes promptly and in full and won’t inadvertently end up spending over budget and eating into your savings.
Most savings accounts also offer interest on your cash, and although this tends to be small, you can still top up your ‘tax budget’ without needing to lift a finger.
Receiving a UK Pension Overseas
As well as everyday things like salary, taxes and savings, a large proportion of expats are retirees.
This adds another perspective to international money transfers, since you’ll need to know how to set up your pension, which currency you’ll receive it in, and to which bank account it will be sent.
There are lots of options here:
UK Pensions for Expats
You can receive a UK State Pension or a Private Pension into a UK bank account, pay tax at source (reclaimable under double tax treaties if you are also liable for local taxes), and draw down the cash from an international bank account.
This usually isn’t the best option since your income will change as currencies fluctuate, and you’ll be paying transfer fees for every transaction.
International Pension Transfers
You can transfer your pension overseas. This means receiving pension payments in the local currency, without worrying about currency exchange rates. It can also be tax-efficient if local taxes on pensions are lower than those in the UK.
However, this depends on what sort of pension you have, where and when you plan to retire.
SIPPs (Self-Invested Personal Pensions) and QROPS (Qualifying Recognised Overseas Pension Schemes) are the most common options for transferring a UK pension pot to an overseas scheme. It’s best to seek professional advice before making any decisions as a lot will depend on your residence and tax status.
You can receive a UK pension, but decide to have it paid into an international bank account. The same tax complications arise, so you need to consult HMRC to ensure you don’t end up paying tax at source, and in your host country.
The best steps to manage your pension are:
- Inform HMRC. You must let them know if you are moving abroad, which will impact your tax status.
- Decide whether your move is temporary or permanent. If permanent, transferring your pension might be the best choice. If temporary, it might be most straightforward to keep your pension fund in the UK and tolerate the currency exchange rate.
- Consult the Pensions Advisory Service if you’d like free advice about moving abroad and transferring your pension scheme.
- Contact the International Pension Centre if you need support with receiving your UK State Pension as an expat living overseas.
- Research transfer charges. After December 2020, when the Brexit Transition Period ends, UK nationals may need to pay an overseas transfer charge of up to 25% of your pension scheme if you wish to move it abroad.
Don’t forget to find your lost UK pension while living overseas.
Transferring Money Abroad to Buy Property
If you are buying a home in your new home country, you’re going to need cash for the deposit and for paying fees such as to solicitors.
Exchange rates make a big difference when you are transferring larger values, so it is essential to do your homework and find the cheapest rates. You should also aim to transfer funds for a deposit at the optimal time when the exchange rate is looking the most attractive.
A good way to do this is to book a foreign currency trade in advance, as previously discussed.
Foreign Exchange Money Transfers For Expats FAQ
The idea of managing foreign exchange transfers is to give expats more spending power.
The best way to make sure you get a good deal is to follow our tips and answers to the most asked questions from expats.
Usually, yes. You will receive wages and spend money in the local currency, so it makes sense to transfer your money into this denomination.
If you are on assignment, many contacts pay in US Dollars.
Using an overseas currency when living as an expat can make life expensive as you’ll be paying conversion charges for every transaction and be exposed to changing currency exchange rates.
Typically, a dedicated money transfer service offers the lowest rates and most competitive service charges to transfer money across borders.
You should take the time to compare at least three transfer providers to ensure you are getting the best deal.
The turnaround time for an international money transfer depends on the payment method.
Typically, an ACH transfer will take around three working days.
Processing a wire transfer usually completes the same day and cashing a personal cheque can take as long as a week.
It’s advisable. You will need a local account to pay utilities, set up regular payments, pay for groceries and everyday essentials, and usually to be able to rent a property.
If you transfer money through your bank or a money transfer provider, they will usually have a minimum in place.
Mainstream banks can process transactions from as little as £100, although they can charge up to £25.
Transfer providers usually have a minimum, which on average, starts at around £1,000 – although it can be as low as £250.
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