Making Payments Abroad

privateryan_2

I recently helped someone buy their property abroad by sharing my knowledge about International Payments, and just wanted to post it up here to make sure anyone interested is aware of how International Payments work, and how you can minimise costs involved if you need to send money to the EU.

In fact, understanding the legislation here can help with any international payments for any reason... not just buying property!

European Parliament and Council Directive 97/5/EC of 27 January 1997 on cross-border credit transfers (http://europa.eu/scadplus/leg/en/lvb/l24023.htm)

Some key things to be aware of - if you're making a payment within Europe, provided you instruct your bankers to remit the payment as per the formatting guidelines mentioned in 97/5/EC - NO CHARGES APPLY (or at least, the payment should be charged as if it were an Inward Domestic item by the country of receipt... bearing in mind that I have never come across any country in the WORLD that charges fees for receiving funds domestically provided the payment is formatted correctly).

The person who is to receive the money (The Beneficiary) must tell you their "IBAN" [International Bank Account Number] and Branch SWIFT-BIC. If they can’t or won’t, get them to get the info from their bankers, or tell them THEY will have to cover all the payment charges (instruct your bank to apply ALL CHARGES TO THE BENEFICIARY)

You must also state in your Payment that you want the Payment Charges to be "Shared" between you and the beneficiary.

Provided you have conformed to these requirements, all payments below EUR50,000.00 or equivalent will not likely be charged to be received.

Your Bank will no doubt charge you a £20-£40 charge, however, per payment you send.

If your payment is above EUR50,000.00 (Say around EUR300,000.00 if you're buying a property abroad) - check with your bank what "Correspondent Bank Charges" apply for the destination country as 97/5/EC doesn’t apply to payments over EUR50,000.00.

Many banks aren't sure themselves what destination country/bank charges will apply to your payment, so they apply an "Anticipated charge" when you tell your bank that you want to cover all the charges and want an exact amount to reach the beneficiary (which generally you will have to do if you're buying property).

Most UK Banks charge 0.15% for payments going to Spain for example. On EUR300,000.00... that's going to be EUR4,500.00 in charges.. plus the £20-40 Processing charge!! Be careful here... bear in mind this is an ANTICIPATED CHARGE... the bank aboard may very well not claim that amount back from your bank for processing your payment... I've known the foreign bank to claim back just EUR50,00 as standard... leaving the UK Bank to pocket the rest! :eek:

If you’ve been a victim of this, mention it on this thread or PM me as we may be able to claim some back…

If the 'anticipated charge' is going to be high, you may be best off slicing your large payment in to amounts below the EUR50,000.00 threshold so that 97/5/EC applies.

If we imagine your bank charge GBP20 per International Payment, and you want to send EUR300,000.00

6 Individual Payments @ £20 = £120.00 which is considerably less than EUR4,500.00 (about £3,000.00!)...

There are other companies like HIFX which offer fair priced options for sending money abroad, so don’t think your bank is the only option. HIFX make their money back on the currency exchange rate they use on your money, so it’s a ‘reasonable’ option, but bear in mind that HIFX ultimately make your payment through a bank anyway…

derbyjo

Good morning
I've been reading as many threads as I can, but I am after some advice regarding buying property abroad. I have found a property in Malta (and lots of people on here seem to hold strong views about Malta as a holiday destination!) and am due to sign the contracts on 29 Nov 07. I now need to send the funds over there to my notary. The rate is terrible at the moment (1.5850 when I started the transaction, now 1.673 via the internet, or 1.686 via my own bank) and it is going to cost a substantial amount more. Are there any alternative methods which anyone can suggest to help with the poor exchange rate?
Many thanks

Jonbvn

Hi,

There is already an excellent MSE article regarding sending money overseas.
http://www.moneysavingexpert.com/banking/overseas-money-transfers

Generally speaking, the FX brokers will offer far better rates than your bank.
Here's a list of brokers referred to in the article:
http://www.find.co.uk/banking/commercial_foreign_exchange/?partner=wlnewmoneysavingexpert

derbyjo

Thanks for that, I had read it, and tried many of the suggested companies, but the rate is just bad. I was wondering whether there was an alternative solution that could work, like changing it to dollars and then to lira, or some other way, but I may just be unlucky!
Thanks though

Jonbvn

derbyjo wrote: »

...like changing it to dollars and then to lira, or some other way, but I may just be unlucky!
Thanks though

You should never ever do what you suggest, since you will lose out on 2 sets of exchange rates.

nobblyned

privateryan wrote: »

Most UK Banks charge 0.15% for payments going to Spain for example. On EUR300,000.00... that's going to be EUR4,500.00 in charges..

0.15% of EUR 300k is EUR 450, rather than EUR 4500.

But still a sizable amount I agree.