Financial Perspectives

You’d think that that these days banking practices around Europe would be fairly standard. After all, the banks handle international business every day so they’re in constant contact with their counterparts in other countries.

Of course, it’s one of many areas where European business practices are far from standard.

Take the UK and France for example. Two countries with a very long history of interaction so you’d think that many things would be similar except that they aren’t.

In the UK, credit cards are commonplace and it’s normal, expected even, for people to have several of them. In France, credit cards are a relatively new phenonmen and remain very rare.

In the UK, almost everyone has an overdraft and the banks prefer you to be permanently overdrawn as they collect more fees that way. In France, they’ll close your account if you’re overdrawn more than a couple of months.

In the UK, debit cards don’t have any purchase limit on them. In France, you can’t buy more than 3000�� a month usually, which is why you often see people resorting to cheques towards the end of the month.

In the UK, nobody will accept a cheque without a cheque card (a card issued by their bank and guaranteeing the cheque will be paid). In France, almost everyone until recently accepted cheques because if you bounced a cheque you could be banned from having a cheque account at all. That actually worked well until very recently when the economic situation seems to have caused something of a run on dud cheques so the effect is that more and more businesses don’t accept cheques which is sure to cause trouble soon so long as that debit card spending limit remains.

Any one of those differences can easily fell you if you don’t know about it in advance.

Not so long ago there were all kinds of restrictions on transferring money abroad due to currency controls that lots of countries had in place. They’re almost all gone now and it has become more of a natural thing for “ordinary people” to need to transfer money abroad.

Most of the time it’s due to holidays, of course, but an increasing number of us are becoming small scale international jet setters with homes in more than one country and with both of those come a need to transfer money abroad.

Holidays usually involve a different category of currency conversion in that you are on the spot when you need the money, the amounts involved are smaller and you probably don’t have a local bank account. However, whilst the amounts may be smaller individually, added up over the years they will come to quite a hefty sum. Also, many of those who holiday in the same country each year may be considering the purchase of a property there and so have that local account too.

Most people ignore the costs of all those international transactions to their detriment. One friend of mine found that almost 10% of his entire salary was going in such bank charges simply because he was living abroad and using his “home” account in exactly the same way that he always had ie lifting small amounts frequently.

Saving money on those transactions is usually fairly easy. If you don’t want to change your bank, check out exactly how they charge for use of credit, debit and cash cards abroad. You will usually find that debit and cash cards are more economic ways of getting cash than credit cards are in that you won’t be paying interest on the money. However, that’s not to say that they are cheap. Typically a withdrawal of £100 in the local currency will cost you £4 to £5 but note that this includes a fixed transaction charge so withdrawing £20 will cost you around £2 ie 10% whereas £200 would be about £7 ie 3.5%. You can eliminate these charges altogether if you use the UKs Nationwide Flexaccount as it has neither transaction fees nor foreign exchange charges.

It’s slightly better if you buy things, usually. Using a typical Mastercard or Visa card will only incur the foreign exchange charge ie buying £100 of goods will cost you £2.75 and that £20 item would be 70p. Therefore you should buy things with the card directly rather than lifting the cash to pay for them.

What about larger amounts ie if you’re living abroad or have a holiday home abroad? Well, if you follow our advice and get the Nationwide Flexaccount you can lift £500 per day which means that it’s quite viable to use that card in conjunction with a local bank account to transfer amounts equivalent to several thousand pounds. You certainly couldn’t buy a house in that way but it’s enough to fund the payments for electicity bills and the like.

If you are talking thousands, then the usual way is to ask your bank to do a SWIFT transfer. This will cost around £25 plus there’s a currency exchange charge (which isn’t widely available). However, that too can be eliminated in some circumstances. For example, if you bank with HSBC then you can do free transfers to an HSBC account elsewhere in the world but the HSBC Premier account that you need to avail of this costs £20/month (unless you have £50,000 or more on deposit with them) so it’s not as useful as it first appears. However, if you are buying in Spain, the Halifax run to a free account which offers free transfers from Halifax UK accounts to Halifax Spain ones. What’s less obvious is that this route gives you a pretty much free way from pounds sterling to euros anywhere in Europe as banks are required to transfer euros at the same level of charges in other European countries as they do domestically ie to get euros in an account in France, you could transfer from the Halifax UK to Halifax Spain and from there to a French bank.

Other options include the use of the specialised money transfer services such as HiFX (there are lots of similar services around.

I’m reliably informed that the place to go locally to launder some money is a small bank branch in a town just over the border.

Or at least that’s where my informant banks his cash.

The only problem with his choice is that he’s in France and the bank is in Spain. No problem with the currency but what he’s not taken into account is that all European countries have a co-operation agreement in place which means that this bank account will be reported automatically to the French authorities.

I suspect that it will take quite a long time before that attitude of money becoming invisible when you use a bank just over the border changes. It’s been pointless for the Germans to drive over to Luxembourg with a suitcase of cash for quite some time (a very popular pastime apparently).

Anyway, if you’re considering a spot of money laundering, you’ll usually go rather further than just over the border these days.