The European Directive number 2007/64/EC on payment services in the internal market lays down strict rules for the provision of payment services to make them simpler, cheaper and quicker and to protect the consumers. Many of the provisions concern not only the euro but all the currencies of the EU.
One of the important news, in force as of January 1, 2012, is the maximum transfer time of one banking day for payments within the EU, regardless which EU currency is used, and regardless if it is a domestic or cross-border transfer. This is mentioned by the Articles 2 and 69.
Money Transfer between the United Kingdom and France
Figuring out what is the best way of sending money to France from the UK can be a real headache. Not because it is complicated but because of high cost and stealth fees practised by British banks which – with a few exceptions – are totally shameless when it comes to piling on known and hidden fees on foreign money transfers. It is claimed that HSBC has an online facility for commission-free transfers, but I have not seen figures to support this yet. The question is, if there is no commission, do they recover the ‘lost’ fees on other services?First they collect an exorbitant flat fee of typically £25, where the postal bank in Luxembourg charges €0.20 for the same service and Danish banks typically €2.
Next, they charge a known or hidden commission on the exchange rate. This typically costs you 3% of the money transferred to France. Transferring £100,000 to France, for example, would cost you close to £3,000. Ask your bank for an exchange rate quote and compare their rate with the European Central Bank rate to check this. You cannot trust that the commission rate they give is correct, as they don’t base it on the ECB rate. They may well tell you there is no commission, yet – if you were to transfer money to France and back again – you might find out that in addition to the flat fees, 6% of the original amount has evaporated. Compare this with Danish banks where you lose only about 0.2% commission. Ask yourself what happens to the 2.8% that somehow disappears in the murky waters of British banks.
Unfortunately, you can’t easily use a Danish bank to transfer money to France from the UK, so the next best solution is a currency broker. An estimate of the typical savings is in the region of 1% to 2% of the money sent to France, or £1,000 to £2,000 saved for every £100,000 transferred to France. It is typically possible to reduce the exchange rate commission to just over 1% compared with the ECB rate.
Another question to consider for larger amounts is the future development of the exchange rate. If you are to pay a large amount, for example for a property in France, in the future, you risk that exchange rate fluctuations make the purchase significantly more expensive. Some currency brokers propose various options to secure the exchange rate in the future (forward contracts), in some cases protecting you against less favourable rates while allowing you to profit partially from more favourable rates.
Selling and buying currency is not a complicated deal. It’s mostly a question of finding the places where you get the best rates. In France, many high-street banks don’t change currency, and if they do, their fees are generally prohibitive. The best is to find a specialised currency exchange office and check if their rates are good. The best deals you get will give you an exchange rate that is about 4% less favourable to you than the daily European Central Bank rate with no fixed fee. If you change in an airport, you risk losing 8% instead of 4%.
Outside city centres, it may be difficult to find currency exchange offices. In that case, you may consider online change. If you send them foreign currency to be changed to euros, you pay the cost of a recorded letter, a colissimo packet, or a special envelope they will provide for large amounts. They pay you by cheque or bank transfer. If they sell you foreign currency, you pay the cost of posting it to you. But keep in mind that you save the cost of driving around to find a currency exchange office.
Of course, there is an element of trust involved. Be sure to verify that there is a genuine company behind the web site. You can do that on one of the business information sites. Also verify their business results as posted on these sites. Only trust a company that has posted decent results the last couple of years. If it makes you feel more secure, you may also want to scan or take photos of the notes (bills for Americans) before posting them. Be sure to scan or take photos of the sides with the serial numbers.