Save thousands on foreign exchange
The consumer revolt against onerous bank charges is spreading and the latest target is rip-off fees on large foreign-exchange transactions.
Thousands of people use their high-street bank to switch money between currencies, perhaps to buy property abroad or because they work overseas and want to convert their earnings into sterling.
However, banks levy hefty fees on such foreign-exchange transactions, costing consumers an estimated £1 billion a year.
One Sunday Times reader threatened to take NatWest to the small-claims court when he believed he had been stung. He said the bank promptly repaid him £1,250, suggesting it knew that it could not justify the charges.
John Smith (not his real name) sold an apartment in Portugal for a profit of €280,000 (£190,000) at the end of last year. When the proceeds landed in his NatWest account, the bank contacted him to ask if he would like to transfer the money back to sterling and offered an exchange rate of €1.46 to the pound. When the details of the transaction came through, however, they showed that it was at an exchange rate of €1.47, which cost him about £1,500.
Smith, a chartered accountant, said: “I looked back at the records and found that sterling hadn’t traded at that level at all during that day. I wrote to the chief executive, who said the rate I got was correct for that size of transaction. I was not satisfied and took the complaint to the small-claims court. NatWest settled before it got to court.
“I have a strong feeling that customers are being fleeced by foreign-exchange rates and that it is a big earner for banks. If I was doing it again I would definitely research things more fully and use a specialist broker.”
A NatWest spokesman said it was likely that the employee Smith spoke to had given him the wrong rate, and claimed it was highly competitive on foreign-exchange rates.
However, Smith’s experience shows just how much discretion banks have over rates, making it difficult for customers to judge if they are getting a good deal.
A mystery-shopping exercise carried out by Savills Private Finance, a mortgage broker, last Thursday found that somebody wanting to transfer the equivalent of €100,000 through NatWest, at a rate of €1.4120, would need £70,822. If they had gone to Moneycorp or Currencies Direct, both foreign-exchange brokers, they would have got a rate of €1.4753, costing them £67,783 — £3,039 cheaper.
About 90,000 families emigrate each year with assets of £250,000, on average. Banks typically charge about 4 per cent more than brokers once their uncompetitive exchange rates and additional fees are taken into account, according to HIFX, a forex broker, so a family could lose about £10,000 on assets of £250,000.
More competitive services are challenging the banks. For example, Hargreaves Lansdown, an independent adviser, has launched a foreign- exchange service.
Paul Dimambro at the firm said: “It is frightening to hear about the number of people moving substantial amounts of their wealth overseas without considering the impact of exchange-rate movements and the options available.”
Mike Boles, who specialises in arranging foreign mortgages at Savills Private Finance, said: “We recommend that clients use a specialist broker because our experience is that the rates are better and more transparent than you get with the banks.”
Banks tend to charge fees each time you make a transfer and many also levy commission.
HSBC told Savills that commission of between 1 per cent and 2 per cent would be charged for a purchase of €100,000. There would also be a transfer fee of £21 if the money was being sent to another bank and £10 if it was being transferred to another HSBC account.
NatWest said there would be a £20 transfer fee and there might also be charges for advice, expenses and any extra work that was required.
In addition to the British bank’s charges, you may face further fees from the recipient bank. Forex specialists tend to absorb these costs. Moneycorp charges £15 on transfers but it covers any charges levied by the recipient bank and the fee is negotiable on large amounts.
CUTTING THE COST OF A MOVE TO FRANCE
Brenda Durkan, 46, and her husband, Tony, recently bought a farmhouse near Limoges in France.
The couple, who run an ironmonger’s shop in Hertford, are employing a French builder to do renovation work, so they are paying him in euros, and they had to transfer money over for the purchase.
They chose to use Moneycorp because the rates they get are better than those from their bank. They have budgeted €100,000 — about £68,000 — for the renovation work, and should save about £4,000 by using Moneycorp rather than their bank.
Brenda said: "Not only are Moneycorp’s rates higher, but we also know what the rate is before we move the money."
Story Courtesy of TimesOnline.co.uk
