Your Money Deal of the Week; Send Cash Online as the Perfect Present

December 15, 2002

Your Money Deal of the Week; Send Cash Online as the Perfect Present
Martin Lewis

Cut the cost of currency transfer, says money-saving expert Martin Lewis

PRESENTS wrapped with the skill of an origami master and subtle tinsel bows win the emotional prize but a gift of cold, hard cash is tough to beat. A nd money is the perfect present for friends and loved ones overseas. But anyone trying to send cash abroad has to walk a tightrope of expense or risk. So this week's deal is a high-tech solution that could cut the cost of sending money by more than 90 per cent. Western Union and Moneygram still monopolise instant international money transfers for those without bank accounts but they are costly. Electronic bank transfers and international bankers drafts are slower options, although both are still pretty expensive.

However, there is a cheaper and faster solution. PayPal is an e-commerce system owned by US online auction company Ebay. Designed for auction payments, it is also possible and legal to use it to send money overseas. Similar services from Yahoo, Egg and NatWest only allow payment transfers w ithin the UK.

The sender will need a credit card to transfer the money from the UK and the recipient must have a bank account. Both also need an e-mail address but a free Internet address from w ww. hotmail. com set up for the purpose w ould do the trick.

Register online for a free PayPal account. Then enter the amount to be sent and the e-mail address it should go to. The recipient receives an e-mail prompting them to set up a PayPal account too. They can then choose to have the cash paid into their bank after three days or keep it with PayPal to spend on the Net. The minimum w ithdrawal amount is $ 25 (GBP 16).

PayPal only operates in North America, Scandanavia, the UK, France, Germany, Spain, the Netherlands, A ustralia, New Zealand, Japan, Singapore and Hong Kong but is expanding rapidly. Exchange rates are similar to those offered on High Street credit cards and usually better than in the local bureau de change. Money can be sent in pounds, dollars, Canadian dollars, euros or yen. Transactions sent to a country that doesn't use one of these currencies should be done in pounds.

The cost is made up of a few elements but is low overall. Until February 2003 PayPal will only allow UK credit card - not bank account - payments and the recipient has to set up a premier account which means a small cost. This is 20p plus 2.9-3.4 per cent, depending on the currency, and an additional 0.5 per cent international charge. There is also a withdrawal fee for transferring the money to a bank of about GBP 1, although this is free in the US. And, as with any international transfer, the bank at the other end may also make a charge.

PayPal transfers cost a fraction of others. Money transfers at Western Union start at GBP 8 and then rocket.

The cost of electronic transfers and international bankers drafts depend on the bank but most only allow customers to use these services, so shopping around is difficult.

Post travellers cheques and there is commission to pay and generally poor exchange rates, plus, as with sending bankers drafts, it can take some time. The Post Office recommends using its insured postal service and it says never to send cash.

The savings with PayPal are huge. To send GBP 30 to the US, PayPal costs GBP 1.37 or just 5 per cent. Use Western Union and it adds GBP 12 or an extra 40 per cent.

A Lloyds TSB bankers draft with insured postage would take the cost to GBP 16, an extra 60 per cent, while an Alliance & Leicester electronic balance transfer is GBP 25, nearly doubling the cost.

Overall, for GBP 30, PayPal is more than 90 per cent cheaper than any other option. It works for larger sums too.