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TransferWise: Cheap GBP to EUR Exchange

Is your bank ripping you off when you send international payments? TransferWise is one possible solution to the hidden costs (which could be up to 5% of your transaction) embedded in international payments processed by most banks in the UK.  In this post, I’ll outline what TransferWise is all about – in addition to alternatives which might be even better options.

Remember: I’m not a financial advisor. Check out my full disclaimer here.

“How does TransferWise work?”

TransferWise is a service which allows you to exchange currency at the real exchange rate. For this privilege, TransferWise charges a fee – which varies depending on what currency you are exchanging from and to:

GBP to EUR fees are 0.35% + £0.80. Not bad.

This video explains how TranserWise works. In summary:

  • You tell TransferWise:
    • What currency you want to exchange from and to.
    • Where you want the exchanged currency to be sent.
  • You send TransferWise the amount you want to exchange (via bank transfer or credit/debit card).
  • TransferWise processes the transaction.
  • Boom! The money’s been exchanged and deposited to the specified account.

When I tested this with a GBP to EUR exchange, TransferWise credited the specified recipient in just under 14 hours. If you initiated a GBP to EUR transfer on a weekday morning, I imagine it would probably credit the destination account by the afternoon.

Why is this necessary?

Don’t pay unnecessary foreign exchange fees.

Unfortunately (but not all that surprising), it is very unlikely that your UK bank is providing you with the real exchange rate (i.e., the mid-market rate) when changing your money from one currency to another. In some cases, they might be charging you up to 5% above the market rate (see this post). At the time of writing this post, my bank was charging about 2.5% above the real GBP to EUR exchange rate (1.09 vs. 1.11790). When you account for TransferWise’s GBP to EUR fees (0.35% + £0.80), TransferWise was approximately 2% cheaper than using my bank.

Alternatives

There are alternatives available to UK residents which function similarly to TransferWise. MoneySavingExpert describes some of them in this article.

Revolut allows you to exchange from GBP to EUR without any hidden fees.

Depending on the amount you’re exchanging, it could be easier and cheaper to use Revolut. They allow you to send, spend, withdraw, and exchange (in a non-GBP currency) the first £5000 for free every month. After that, you pay a 0.5% fee on cross-currency transactions.

If you exchange and transfer more than £5000 every month, than Revolut premium might be for you.

If you’re looking to exchange and transfer more than £5000 in a non-GBP currency every month, then you could upgrade to Revolut Premium. This allows you to spend, transfer, and exchange an unlimited amount of money for the real exchange rate without incurring any fees. It comes with other features too, which you can learn about here. It costs £6.99 per month and you’re obligated to a 12-month contract (£72 per year if you pay upfront). This might seem like a lot, but it’s worth considering if you’re looking to exchange and transfer more than £5000 of a non-GBP currency every month. Revolut has funding and transfer limits (see here and here), but you can apply to increase your annual limit (see here).

Anything to add?

Did I miss something important? Or did I make a mistake? Let me know in the comments below or tweet me.

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