The English Bank Account - Final Episode

When we got back from our holiday in Croatia, my brand new Visa Debit card was in the mail waiting for me. Finally I could be able to buy something with a bank card, which wouldn't cause any problems or questions. To be fair, my Finnish bank card (which includes both Debit and Credit options) has been really confusing here. Clerks and service people in many places don't know how to handle it, because they have never seen bank cards with dual accounts. And that has been a major issue in every case where my bank card has not been accepted as a paying method. Finnish people may remember how this was an issue few years ago in Finland, until the shops updated their cash register software.

My new horse.

Transferring Money to UK

In the beginning my new bank account had a zero balance, because I didn't want to apply for any pre-planned overdraft. So, the next step to get things running was to transfer money from my Finnish account. I started looking for the best alternative to do that. After doing some research I quickly found out, that all banks and other services want charges, and in fact currency exchange has been one of the oldest jobs in the world since invention of money. Using your current bank would be probably the most obvious choice, but maybe some Internet broker could be also possible... but are those reliable enough?

So, let's say that I would like to transfer 5.000€ to my English bank account. How much money would I then get? I found three possible options, which will be explained briefly in the following chapters.

Option 1: International Money Transfer by Danske Bank

I made a quick phone call to Danske Bank to clarify all expenses. This was the answer what I got: "We're not allowed to tell how much money you will receive to your destination account". What?! So, I asked principles for different charges, because I really wanted to compare these three options I had. If I wanted to transfer exact sum in Pounds, I could do it with this option, but they charge extra 10€ if the sum is not in Euros. And if I wanted to have fast payment (which means that I could probably get my money during the same or the next banking day) they would charge extra 35.50€. And, if I don't know the IBAN number for the receiving account, they would charge again extra 10€. And finally, if I really wanted to make sure that I got the exact sum in Pounds into my receiving account, they would charge extra 20€ for making sure, that the receiving bank doesn't charge anything extra. On top of all these charges they use their own exchange rate, which is shown in their home page. Actually it is the same rate, that they use for selling cash. It will be updated three times during the normal banking day (for instance now the rate is £0.7124 for one Euro). So with this option and with all possible charges included I would receive (5000€ - 10€ - 35.50€ - 10€ - 20€) * 0.7124 = £3508.21.

A screen shot from the Danske Bank's website.

Option 2: SEPA Transfer

SEPA means Single Euro Payment Area, which in fact includes more currencies than just Euro. Therefore I can do SEPA transfer even if the destination currency will be Pounds. When I asked how to do it, they said I only need an IBAN formatted account number and BIC code (also known as SWIFT-BIC, ISO 9362, SWIFT ID or SWIFT code) for the receiving account, and then everything will be free of charges. Fine, I knew both IBAN and BIC as my Lloyds Internet banking system tells me those very clearly. If I didn't know the IBAN, I could also use separate IBAN calculator for finding that.

The only catch on this payment method is that when you use your Danske Bank's money transfer system, the BIC cannot be entered, because there is no field available for that! So can you then be 100% sure, that they will not charge extra 10€ for missing required information? I also found out, that my destination bank Lloyds will be charging extra £7 for any payments received from abroad. The conversion for currency will be again done by original bank, so the exchange rate in this case would be exactly the same as in option 1. Based on these facts, I would finally receive 5000€ * 0.7124 - £7 = £3555.00.

A screenshot from the Lloyds web pages about transaction charges.

Option 3: TransferWise

I really love new and smart services that try to change conventional businesses. There are good examples in different areas of industries: iTunes changed the whole music business, Skype changed international telephone calling business, Netflix changed the video renting and so on. I can tell you now that currency exchange is one of those businesses that really needs new and modern ideas. If that doesn't happen, banks can do legal robbery as long as they want. But thanks to the modern Internet business opportunities, some people had already invented ways to go around normal bank charges. One good example for that is TransferWise, the invention made by Skype founders!

Their business idea is: Open a free bank account in two different currency areas (like Euro and UK). Then, create a web service which offers money transactions between those currencies. Tell exactly how much money the receiver will get. Tell clearly how you charge for the money transaction. Use the rate which is better than banks use. Simple as that.

How can the exchange rate be better than all banks have? Well, here's the trick: while I want to change my Euros into Pounds, there's will be someone (= person A), who wants to do opposite on the same day. So, my money doesn't need to be changed into Pounds (or transferred to UK), as it ends up into person A's destination account in Euros. And I get my Pounds from person A's Pound account. On the way to the different accounts the money goes through TransferWise's bank account (which was by the way in Estonia), and they can charge their micro transaction fee from that. If that happens million times, there will be hell of a lot money moving from conventional bank's pockets to the TransferWise's pocket. And everybody wins, including happy customers.

TransferWise uses mid-market exchange rate, which you can see from www.xe.com. By the time I checked both rates (Danske Bank's & XE's) the mid-market exchange rate was £0.73154 per one Euro. That is 1,914% better what Danske Bank uses. Does it make any difference? Not in small sums, but with 5000 € the difference is remarkable. Even if TransferWise charged 0.5% fee from the transaction I would still save money comparing to the best option provided by Danske Bank. And on top of that I could freely choose the exact sum in either Euros or Pounds. So, transferring money with this option would give me 5000€ / 1.005 * 0.73154 = £3639.50, which is £84.50 (=115.51€) better than the best alternative offered by bank!

Sometimes small decimals matter.

This episode made me think what's the point having a relationship to your bank for nearly 30 years? And by the way, I'm not telling you how much money I actually transferred, but with TransferWise it took less than 12 hours and I can recommend this service to anyone. So if you want cheap and reliable money transfer abroad, here's the link where you can get your first transfer up to £3000 for free: https://transferwise.com/u/97184.

Happy banking with your current bank!