“My bank doesn´t charge me anything” I hear. Are you sure? If you trawl through the many pages of your account details, which you may or may not have been given a copy of, which may or may not have been in English, you could be shocked to see how much your Spanish bank charges you. Some of the biggest banks in Spain will rake-off huge fees if you are not careful or if you do not have the correct account. Unless you have their special Hokey Cokey Twin Turbo Overhead Cam ABC Easy As 123 account, you could be exposed to hundreds of euros of unnecessary charges when transferring money into, or out of, your account.
Perhaps your pension is being paid regularly from the UK to Spain. Generally, in this situation there will not be a charge. However, if you were to transfer a one-off lump sum, the picture could be completely different. A typical charge for deposits is 0.20% of the transfer. On €100,000, that´s €200. If you were to transfer this money from your bank, you could be paying 0.40%. This would be €400.
This charge has nothing to do with exchange rates, although banks commonly offer rates which only airport currency exchange kiosks could beat in terms of bad value. This is simply a charge based on the amount of money transferred to have your own money deposited into your own account. It is extremely unlikely that this will be explained to you when you open the account and, when queried, the answer is generally “well that´s the way it is”. A bank transfer in the UK will normally cost between £15 and £30. When I used this argument with a Spanish bank some years ago, the reply was, “We´re not in the UK, are we?”. When I explained that the charge was excessive and the client might want to withdraw all of his money from the account, the bank manager reduced the fee by 50%. Whilst in the mood, I then went outside to the local market to haggle on how much I should pay for the fruit and veg.
Here is an example of how we helped someone avoid huge fees.
An investment of €95,000 matured. The company holding the money could only pay the money to the clients´ bank account as opposed to directly to another investment company, the target recipient. The clients wanted the money to remain in euros. The clients had a Spanish bank account but not a “special” account allowing free transfers. They were told that they would have to pay €190 when depositing the money.
We wanted to transfer the money to another arrangement which was Spanish tax compliant but based in Ireland. Their Spanish bank´s fee to transfer the money out was €380. Therefore, to accept and then pay the €95,000, the total charge was €570. This was deemed unacceptable by the clients.
What we did was open a euro account with a bank outside Spain who did not charge for accepting the money. In addition the charge for making the payment was €60, a combined saving of over €500 compared to their bank´s charges.
Another example of how someone might be caught out is when selling a property in Spain, depositing the sales proceeds with a Spanish bank, and then subsequently buying another property or investing some or all of the funds.
Like all things financial, clear explanation is required when opening a bank account or any type of savings or investment plan. Having faith that your friendly bank manager will be looking after your financial interests may lead to a few disappointments if not absolute shocks.
At The Spectrum IFA Group, we explain ALL of the charges before you sign anything. There are no hidden fees which you will find out about when you least need the news.
For more information on taxes, pensions, QROPS, investments, currency exchange, mortgages, funeral plans, and all other aspects of personal finance, email firstname.lastname@example.org or call/Whatsapp 618 204 731
With care, You prosper