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Five traps to avoid when transferring money to and from the UK

Navigating international finances can be complicated, no matter how seasoned you are at transferring funds overseas. Knowing the common pitfalls of sending money abroad can save you a lot of trouble (and hopefully some money too).

Five traps to avoid when transferring money to and from the UK
Photo: tbtb/Depositphotos

The changeable market keeps most expats on their toes with exchange rates, fees and timings. Whether you’re sending money to friends or family in far-flung places or repatriating money back to the UK, you should know the most common mistakes people make when transferring money internationally.

That’s why we’ve collaborated with international payments specialist Hargreaves Lansdown to help you avoid falling into these traps.

Stop losing money on international transfer fees with Hargreaves Lansdown

1. Forgetting to check the exchange rates

Whether you’re a small business or an individual, chances are you’ve used your bank to make international currency exchanges and transfers. After all, this is the most obvious option. But it’s also often the most expensive option as you could be paying well above the odds.

Even the smallest change in the exchange rate offered by your provider could cost you hundreds of pounds (possibly thousands). So it’s important to shop around for the best rate.

Save as much money as possible by looking at currency specialists, such as Hargreaves Lansdown, as the exchange rates they offer are often better than the banks’. This is especially beneficial when transferring large amounts of currency for more expensive purchases such as property.

2. Paying transfer fees

Although still a common practice, it is unnecessary to fork out extra for high bank transfer fees. Incurring a flat fee can sting if you’re sending relatively small sums across country borders. Some currency specialists offer individuals or small businesses regular payment plans for recurring payments which help to keep costs down.

There are providers, like Hargreaves Lansdown’s currency service, that offer low or no transfer fees. This can save you up to £30 on each and every transaction, which really adds up if you are making multiple transfers or paying invoices. 

3. Making insecure payments

Not all currency specialists are created equal, some are more secure than others. Make sure you’re protected financially from the moment the money leaves your account to when it reaches its destination account.

The terminology can confuse the most clued-up of people but there is a huge difference between whether a firm is authorised or registered with the Financial Conduct Authority (FCA).

Hargreaves Lansdown’s Currency Service is an FCA-authorised service, which in practice means they are legally bound to keep your money transfers separate from their company funds and provide financial safeguards proving their stability.

Whilst registered firms may choose to safeguard your money, they aren’t required to do so. And they don’t have to provide the FCA with as much detail about their business, so the regulator can’t check on their financial health.

4. Leaving it until the last minute

Don’t leave yourself at the mercy of the exchange rate on the day you transfer. If time allows, savvy savers should plan their transfer as far ahead as possible. This gives you more flexibility as you’ll have the option to fix an exchange rate for the future, or target a specific rate. 

If you’re fixing an exchange rate you’ll have the peace of mind to know what a future purchase will cost you, regardless of whether rates move up or down. Targeting a specific rate will enable you to make the most of improvements to rates, but doesn’t offer protection if rates move against you. Both of these options are only available if you plan ahead.

Bypass bad exchange rates with Hargreaves Lansdown

5. Not keeping up to date on the latest news

You wouldn’t expect to be well-versed in current events without consuming the news. The same goes for your finances. Without monitoring the latest market developments it leaves you vulnerable to making the wrong decisions in the fast-moving world of finance.

Stay on top of trends and currency movements and how to best position yourself to take advantage of the highs and avoid the lows. Hargreaves Lansdown offers a free weekly report on their website and via email, making sure you get the most from your payments. Please note, their service does not provide personal advice, but can provide information for you to decide what’s right for you. If you’re unsure please seek advice.

Download your free guide to international currency transfers here.

This article was produced by The Local Creative Studio and sponsored by Hargreaves Lansdown July 2018

The Hargreaves Lansdown Currency Service is a trading name of Hargreaves Lansdown Asset Management Ltd. One College Square South, Anchor Road, Bristol. BS1 5HL, authorised and regulated by the Financial Conduct Authority as a Payment Institution under the Payment Services Regulations 2017, see www.fca.org.uk. FCA Register number 115248. Registered in England and Wales. Registration number: 1896481.

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READER QUESTIONS

Reader question: Can I save money in Switzerland by buying products on foreign websites?

With the cost of living soaring due to inflation, many consumers in Switzerland are looking for ways to save money. Could buying goods abroad through foreign websites be a good solution?

Reader question: Can I save money in Switzerland by buying products on foreign websites?

With the Swiss franc still stronger than the euro, ordering your products online from European distributors could indeed be cheaper than paying Swiss prices.

A recent report by the RTS public broadcaster, found that even some Swiss products are cheaper when purchased abroad — for instance, capsules for Nespresso coffee machines cost less on the company’s German site than they do in Switzerland.

This applies to a variety of products, ranging from food and beverages to clothing.

In fact, shopping on foreign platforms became a lot easier for the Swiss in January 2022, when ‘geoblocking’ — the practice that restricts access to Internet content based on the user’s geographical location — was banned in Switzerland.

This means Swiss customers are no longer denied the possibility of buying on foreign shopping platforms.

However, there are things to consider before you go on a shopping spree “abroad”, such as additional charges.

While something may appear to be a really great deal in comparison to Swiss prices, keep in mind that the purchase may be subject to customs duties.

According to the Federal Office for Customs and Border Security (BAZG) “the customs duties are generally calculated according to the gross weight (including packaging), and are often less than 1 franc per kilo. Particularly alcoholic beverages, tobacco goods, foodstuffs, textiles and jewellery items are subject to higher customs duties”.

In other words, before you order something that you think is a really good deal, find out if any additional charges will be due; depending on the amount, the final cost may not make it worthwhile for you to purchase abroad.

The good news is that, as BAZG points out, goods ordered from “countries with which Switzerland has concluded a free trade agreement or from developing countries can usually be imported duty-free or at reduced rates”.

You can find out more information about which countries are included, here.

But you could face other problems as well.

As the RTS reported, while ordering items abroad is easy, having them delivered to Switzerland may not be.

As a test, the RTS team tried to order common products, such an Ikea piece of furniture, a vacuum cleaner, and brand-name sneakers — all of which are more affordable abroad — but discovered that “it was impossible to get these objects delivered to Switzerland”.

That’s because on some shopping platforms a customer can’t change the destination country — it is embedded on the site and blocked.

At some of these  merchants, “the customer is even directly redirected to the Swiss site if an address in Switzerland is indicated”, RTS said. This means you will end up paying Swiss prices.

Sophie Michaud Gigon, general secretary of the consumer protection association FRC, told RTS that some foreign sites have not yet adapted to the law prohibitng geoblocking.

And there is something else too that you should pay attention to online.

Say you prefer to avoid foreign sites and shop in Switzerland instead. This could be a problem as well.

Under the Swiss law, it is possible to obtain a domain name ending in .ch, even though these companies are  located abroad. This has proven to be misleading to many Switzerland-based customers.

That’s why many clients who believe they are ordering from a supplier in Switzerland are actually buying from a foreign company — a fact that they only discover when they have to pay customs duty.

The only way to avoid this trap, according to FRC, is to call the number on the company’s website and ask where they are located.

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