How to send money abroad without losing 4% to the exchange rate

If you have ever sent money to family abroad, paid a deposit on a flat in another country or settled an invoice in dollars, you have probably compared fees. One provider charges €15, another €5, a third says "no fees at all". It looks like an easy choice.

It usually is not, because the fee is rarely the expensive part. The real cost of most international transfers sits in the exchange rate, and it is typically between 3% and 5% of what you send. On €2,000, that is €60 to €100 that never reaches the other side, and nothing on the receipt calls it a fee.

The rate you are shown is not the real rate

Every currency pair has a mid-market rate: the midpoint between what banks pay to buy a currency and what they sell it for on the global markets. It is the rate you see on news sites and search engines, and it is the fairest benchmark there is.

Most banks and money transfer shops do not give it to you. They take the mid-market rate, shave a percentage off it, and present what is left as "our exchange rate". The difference, the mark-up, is their margin. Because it is folded into the rate, it does not show up as a line on the receipt, and it is hard to spot unless you check the mid-market rate yourself at the same moment.

That is how a provider can advertise zero fees and still be the most expensive option on the high street.

What it costs in practice

Here is what four options look like for sending €2,000 to a US dollar account, with the mid-market rate at 1.0842 dollars to the euro. The bank and the money shop figures are typical of what we see when we check quotes each month.

The provider with no fee is the one that costs most. The bank looks reasonable until you notice the rate is 3.1% worse than the benchmark. Pocket charges a visible fee, 0.41% plus €0.30, and then converts at the mid-market rate, so the fee is the whole cost.

How to check any quote in a minute

You do not need to use Pocket to avoid the mark-up. You just need to compare like for like. Before you send, run through these:

1. Look up the mid-market rate at the same moment you are quoted. Rates move during the day, so a figure from this morning will not do.

2. Ignore the fee for now and ask one question: how much will arrive, in the recipient's currency? That number includes every cost, visible or not.

3. Work out what the mid-market rate would deliver by multiplying the amount you send by it. The gap between the two is what the transfer really costs you.

4. Check for charges on the receiving side. Some transfers pass through intermediary banks that deduct their own fee on the way. A good provider tells you if that can happen, and some guarantee the amount that arrives.

5. Compare as a percentage. Anything under 1% is good. Over 3% means you are paying for something you probably do not need.

If a provider cannot tell you exactly how much will arrive before you press send, treat that as the answer.

Speed is part of the price

The cheapest transfer is not much use if the money arrives after the rent is due. Traditional international transfers still take two to five working days, partly because they hop between several banks before reaching the right one.

Pocket sends to 160 countries, and most transfers arrive in seconds because we pay out through local payment systems in the destination country rather than through a chain of banks. Where we cannot be instant, the app tells you the expected arrival time before you confirm.

A few habits that save money

• Hold the currency if you will need it again. A Pocket account holds 38 currencies, so if you pay a landlord in pounds every month, you can convert when the rate suits you and keep a balance ready.

• Set a rate alert. Tell Pocket the rate you would like, and we will let you know when it gets there. Pocket AI can set one for you if you ask.

• Send larger amounts less often. With a flat element to most fees, one transfer of €1,200 costs less than four of €300.

• Do not convert twice. Sending euros from a pound account through a provider that converts via dollars costs you two mark-ups. Check which currencies leave and arrive.

You can see exactly what any transfer would cost, with the amount that will arrive, on our transfers page before you open an account.