WeSwap: peer-to-peer service offers cheap new way to get foreign currency

WeSwap means you cut out the middle man, letting you get your hands on travel money cheaper. Neil Faulkner explains.

WeSwap is the first service where you can swap travel money with people in other countries, thereby cutting out middlemen from the deal.

It gives you the "real" exchange rate (the interbank mid-rate) and charges just 1% on top for a swap within seven days, which is incredibly cheap compared to banks, Travelex and just about anyone else. If you want your money faster there will be a 1.3% fee for a swap within three days and 2% for an immediate swap.

You can even swap for free with people you invite to join through the WeSwap website.

How it works

1. Open an account online and upload proof of identity (such as a scanned copy of your passport and a copy of a bank statement).

2. Load pounds into your account either online or using WeSwap's Android or iOS app.

3. Trade your pounds with other people's foreign currency.

4. Spend or withdraw your currency using a prepaid MasterCard you receive in the post.

Currently you can trade:

Danish Krone

Euro

Pound Sterling

Norwegian Krone

Swedish Krona

US Dollar

Swiss Franc

Australian Dollar

Canadian  Dollar

Hungarian Forint

Hong Kong Dollar

Japanese Yen

New Zealand Dollar

Polish Zloty

Singapore Dollar

South African Rand

Turkish Lira

Israeli Shekel

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How WeSwap compares

It's normal to pay roughly 2.5% to 7% (even if it's called “commission free”), so WeSwap's fees are pretty good.

For example, compare “commission free” Travelex's prices to WeSwap, as I write, for exchanging £500 into euros:

Swapping £500 for euros

Banks, the Post Office and Marks & Spencer have nothing on WeSwap.

Most local high-street bureaux will be more expensive than WeSwap, but a very small number of them (not Travelex and not at airports) might give you the same price, give or take some pennies, particularly some London bureaux when you buy in advance and collect in person. I used to use the Euroexchange Bureau in Marble Arch and got a similar price to WeSwap.

Some traditional prepaid travel cards (that is, cards that aren't person-to-person) can be cheap too, but I've read the small print for several of them and so far they've all had too many catches or extra charges for me to highly recommend one.

Some credit cards can be cheaper than WeSwap. As we have written many times before, these cards can cost you absolutely nothing. But credit cards have up to 46 booby traps, by my count, so learn how to use them carefully.

For a look at some of these traps, check out Credit card small print traps to avoid.

WeSwap versus CurrencyFair and TransferWise

WeSwap is different to CurrencyFair, the other foreign currency peer-to-peer service.

WeSwap is for expats, business travellers and holidaymakers, whereas CurrencyFair is just for expats or other people who have bank accounts in two countries.

I've been using CurrencyFair for some time, because I live in Germany but earn my money in pounds from companies in the UK. But CurrencyFair is no use if you're just popping to Berlin for Reunification Day celebrations.

For expats, I expect CurrencyFair to be cheaper than WeSwap for most transactions over approximately £500. The larger the transaction, the more likely you are to be better off with CurrencyFair over WeSwap.

TransferWise is another service for sending money overseas, rather than for getting travel money. It is not peer-to-peer, yet it is still frequently cheaper than CurrencyFair.

Compare the best credit cards for use overseas

WeSwap has a few more costs

If there aren't enough people for you to swap currencies with then WeSwap will try to step in and swap with you itself. This costs 1.5% rather than 1%, but it's still a pretty good price.

There are other costs in the small print, two of them noteworthy:

• If your account is inactive for 12 consecutive months WeSwap charges you £2/month for each month that it has been inactive, so that's a bill of £24 to start with. However, WeSwap told me it will email you to suggest you do something with your account, or close it. WeSwap said any activity – loading money, swapping currency or spending/withdrawing money – will give you another 12 months.
• You'll be charged £1.50 for making cash withdrawals of less than £200/€250. Cash machine providers sometimes add their own charges on top, but they should warn you about them at the ATM before you proceed.

When paying using any card overseas, don't pay in sterling even if the seller points a card reader at you with a price in pounds. Tell the seller you'll pay in the local currency only. Otherwise you'll be hit by extra charges.

Some of the small print mentions a “redemption fee” when you transfer money from your card back to your current account (e.g. when you want to close the account), but WeSwap assures me there is no such charge. You have to do this in your own currency though, and you have to do it by writing to WeSwap.

WeSwap suggests it would actually be easier to just withdraw the money or spend it.

If you dispute a transaction you can request a chargeback, as with other cards. There is a chargeback fee of £10, but this will be refunded to you if the chargeback is successful. WeSwap told me it will assist you in liaising with sellers before trying a chargeback.

Small print

The terms and conditions state that you're responsible to check for changes to the small print. However, WeSwap told me it will inform you about changes by email two months in advance.

Is it safe?

There's no protection if your funds on your card go missing if WeSwap (or its partner IDT Financial Services) goes under. But your funds should be held in a segregated client account. This means they'll only go missing if there's fraud or incompetence.

You have recourse to the English courts if you have a legal problem, but you don't have access to the Financial Ombudsman Service for complaints.

Always bring another form of payment with you, especially since the office is only open from 8:30am to 6pm on weekdays.

More on money:

Transfer money overseas at almost zero cost with TransferWise

Azimo offers cheap overseas money transfers through Facebook

Five ways to transfer money abroad

Five more ways to transfer money abroad