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If you need to send money to Canada – to friends and family, to buy a holiday home or for business, for example – it’s important to secure the best exchange rate and keep any charges to a minimum. This way, you can ensure you’re getting the most Canadian dollars for your pounds.
There’s a broad range of options available for sending money overseas. Here we take a look at some of the different methods for currency transfer and various pros and cons of each.
What are the options for sending money to Canada?
There are several options for sending money to Canada. But each method will have its own pros and cons. The best solution for you will depend on the nature of your transaction, such as how much money you want to send, how many transfers you want to make – and how quickly you need it to arrive at its destination in Canada.
High street bank
Many people use their own high street bank when they need to send money overseas. This can be a convenient and secure method. That’s because all money in UK regulated banks has full protection up to £85,000 per person per banking institution under the Financial Service Compensation Scheme FSCS.
However, using a high street bank is unlikely to be the cheapest option.
High street banks tend to charge high fees for foreign currency transactions and the exchange rates may not be the most competitive.
A bank transfer also won’t usually be very quick. It can sometimes take a number of days for the funds to be cleared and at your destination in Canada.
In addition, some banks impose a maximum limit on the amount you can send internationally per day, although this is likely to be fairly high.
The minimum transaction is usually fairly low. Some people choose a bank transfer because the amount they want to send is lower than the minimum required by online or digital currency exchange brokers, for example.
Currency broker
Specialist currency brokers (sometimes called FX brokers) are likely to be a more cost-effective option than a bank. They typically offer competitive exchange rates and lower fees.
Online or app-based FX brokers enable you to send small or large sums quickly to Canada, although some providers may impose maximum transfer limits.
Watch out also for providers offering ‘no fees’ or ‘commission-free’ deals. Fee-free options can sometimes mask a poor exchange rate on your currency, so could, in fact, end up costing you more.
You can usually find out how much your specific Canadian dollar transfer is going to cost by using the calculators on the provider’s website or app. This can be a useful way of comparing exchange rates and fees between FX companies before making your choice on the best deal.
Research the different brokers and check out their credentials before going ahead with a transaction. Always use an FCA-authorised company offering competitive currency rates and low charges. If a broker is authorised by the regulator then client money must be ring-fenced from the finances of the business, this means it is protected should the firm go bust (although it won’t always be protected by the FSCS scheme).
To use an online broker you’ll usually have to register first and then set up your payment options, typically by giving credit card or bank details for transfers.
Digital money transfer provider
Digital and app-based money transfer services, such as those on offer from Revolut, Wise and Xe.com typically have lower fees and charges, and a more competitive exchange rate for Canadian dollars, compared to a high street bank or high street currency provider.
The digital services will usually have an online calculator on their website where you can see the live exchange rate you’ll be offered, and the charges, for your particular money transfer. This way you can easily compare different providers.
Which provider will be best for you will depend on your specific transfer. While some digital currency brokers are cheapest for large transactions and in certain currencies, others may be more competitive for smaller transactions, or might offer a better exchange rate for the Canadian dollar, for example.
Your chosen method of transfer, whether it is by bank transfer or a credit card payment, for example, will also make a difference to the overall cost.
Digital transfers can usually offer instant, and sometimes fee-free transfers using the ‘real’ or mid-market currency rate.
But these providers don’t usually have a UK banking licence, so your money isn’t protected under the FSCS in the event the company goes bust. If you’re worried about the safety of your money, check what Financial Conduct Authority (FCA) authorisations a particular provider has and what alternative safety measures are in place for customers’ funds.
To send money via a digital money transfer service you’ll first need to open an account with your chosen provider. You will need to provide proof of identity in the same name as your UK bank account. There could also be further checks if you’re planning to send large sums of money to Canada.
Some companies also impose minimum and maximum limits on how much currency you can transfer per day.
High street money transfer service
Services, such as those from popular high street providers Moneygram and Western Union, are convenient and can be quick. But they will rarely offer the best value way to send money to Canada.
They are often used if the sender or recipient does not have a bank account to receive the funds, as the money can be collected from one of thousands of designated outlets across Canada. They are often inside shops and newsagents for example.
The fees charged by these types of providers are usually relatively high and the exchange rate will probably be poor, compared to online or digital currency brokers. In addition, be aware that the maximum cash transfer limit may be quite low.
Overall this type of money transfer can suit some particular types of transaction, but it is likely to be among the most expensive options.
Paypal (Xoom)
You can send money to Canada via PayPal, using its Xoom service for overseas money transfer.
This can be quick and convenient if you already have a PayPal account (some transactions to other PayPal accounts are instant). You can send the money with Xoom from your PayPal account, via a bank transfer through PayPal or with a debit or credit card.
The recipient doesn’t have to have a PayPal account. You can even send money via PayPal for cash pickup, although the charges start from £6.99 for this service.
The maximum amount you can send is the equivalent of $25,000 US dollars (around £20,000) in a 24-hour period. The maximum for cash pick-up is £8,500 per 24 hours. But additional identification and proof of address may be required for single transactions of more than £850 (or above £400 for cash pick-up).
It is also important to note that cash held with PayPal and money transfers are not protected under the FSCS, although PayPal is regulated and authorised as an e-money institution. Paypal has its own ‘Money-back guarantee’ scheme which promises to refund your transaction in full if the money is not received.
How much money can I send to Canada?
Most currency brokers and money transfer providers impose maximum daily limits on transfers. It means that if you need to send a large sum to Canada you’ll need to compare different providers to see which can accommodate your money transfer. But don’t forget to factor in the fees and charges, exchange rate and the security of the transaction.
There are also likely to be extra identity and address checks for sending larger sums of money, due to money laundering regulations.
Similarly there can be less choice of options if you only want to send a small amount of currency (some providers impose a minimum transaction value), plus the charges can end up being disproportionately high.
Is my money transfer safe?
Sending money through a UK regulated bank offers full FSCS protection, subject to the FSCS limits and terms and conditions.
Many currency exchange companies offer their own money safety net scheme, but it may not be as generous or robust as the FSCS. So it is up to individuals to decide what level of financial protection they’re comfortable with.
FCA-authorised currency providers must keep clients’ money separate from the company’s own funds – this should protect your funds if the firm were to go under. But if a company is just on the FCA register (and not authorised or regulated), then customers’ cash could theoretically be lost if the company went into administration.
Research currency companies before you decide to make a transaction and tread with caution. Scams and fraudsters are rife in the currency transfer market.
Can I set an exchange rate in advance?
It may be possible to ‘fix in’ the exchange rate in advance with some currency brokers and money transfer providers. This is known as a forward contract and it can be highly beneficial for large currency transfers, where even a small negative movement in an exchange rate can lead to a significant loss when you come to exchange your money.
With a forward contract you effectively fix or lock into a particular exchange rate today, but you won’t make the actual currency transaction until a later date. This can provide peace of mind, help with budgeting in some cases and minimise the potential for surprises.
Of course, there is the risk that the pound will strengthen in value against the Canadian dollar – but the forward contract can help you hedge against a worsening exchange rate.
