Foreign Perspectives

Archive for the ‘International Banking’ Category

We’ve been investigating how our banking, investments, savings, pension, and mortgage will work when we move to Australia as we can explore that now rather than wait until everything is happening at once.

Banking turns out to be relatively simple. Many people will use Wise initially which, although not an actual bank, will give you local account numbers in both the UK and Australia. Although both will work for the usual direct debits, payments, and debit card transactions, the Australian one has some limitations, specifically it can’t be used to receive social security payments. However, much better is the HSBC Australia Everyday Global account which is a proper Australian bank account and is the only Australian bank that let’s you fully open an account from abroad (tell them that you’re using it for saving, NOT that you’re going to be moving there); the debit card arrives in a couple of weeks. Although you don’t have to have an HSBC UK Advance account, if you do, you can do instant transfers from it to your HSBC Australia account. The other plus point of this is that HSBC UK will let you keep that account when you’re living in Australia. Transfers in the reverse direction take a day or two unless you have HSBC Premier. You need to use the HSBC Australia account every month or two so that it doesn’t go dormant.

Savings are more tricky as many banks and building societies will require you to close your accounts when you move abroad. Notable exceptions to this are the Nationwide, HSBC, Lloyds, and RBS/NatWest. If your cash ISA is with one of these, you could keep it but a) can’t add more to it and b) the interest will be taxable in Australia as they don’t recognise ISAs. The same mostly applies to investment ISAs and investments generally.

Banking in Australia is a bit different. When you move, you’ll find that many of the UK banks and building societies will close your account so you want to have one or more of the above opened before you move, as you’ll not be able to open them afterwards. As you’ll notice, those I’ve mentioned above are legacy banks and in practice most (all?) of the fintech banks (Kroo, Monzo, Starling) will close your account. If you fancy a fintech in Australia, there’s UBank and Up, but you can’t open those until you are an Australian resident.

Pensions are rather more complex. Due to HMRC requirements, if you are going to transfer your pension then it can only be to an Australian SMSF which is QROPS compliant which in turn means that you’re looking at setup fees of around £2000 and similar annual fees after that. The maximum that you can transfer in this way is A$120000 (£60000) per year (potentially triple that in your first year). Alternatively you could just access your UK pension from Australia and simply declare the withdrawals in Australia (they’ll generally be subject to Australian income tax as if you tell HMRC that you’ve left, they won’t apply UK tax). Given that my UK SIPP costs all of £120/year, my current thinking is that I will just leave it in the UK and make withdrawals as I’d have done if I’d still been in the UK. One thing to note is that you don’t need an international pension and any place that seems to offer one is likely a scam. That said, some normal SIPPs come in a rebadged international version so, my one with AJ Bell does, but it’s just the same with a different name on the tin. You can only transfer defined contribution schemes, not final salary ones nor your UK state pension. If you tell the state pension people, they can pay your pension to an Australian bank account in Australian dollars, or you can get it paid into a UK bank account. As I say, this is a complex area and you’re going to need advice on this.

Credit cards are something that you may want in Australia, however you won’t have a credit history when you turn up obviously and therefore will likely get rejected when applying. Two ways around this are to open an American Express card in the UK before you leave and use their Global Transfer service (basically you apply for a card in Australia and in the application check the box that says existing customer and you should be in business. Their Australian cards mainly come with a fee and to my mind, the best currently is The American Express^® Platinum Edge Credit Card which is A$195/year after the first year but comes with enough supermarket discounts to, for me, cover the cost. If you don’t want a fee, there’s The Qantas American Express Discovery Card and The Low Rate Credit Card. Worth noting is that Amex acceptance seems much lower in Australia than it is in the UK. The other way around no credit history is to apply for an HSBC Australia credit card as they will check your UK credit history; their Premier card is free and their low rate card is A$99/year.

So what about a mortgage? If you’ve a mortgage on your UK home, you’ll likely have to pay that off before you go, or essentially change it into a buy to let mortgage (the interest rate will usually be about 1% higher). You seem to be able to keep a buy to let mortgage going although it’ll be a bit more complicated when you come to renewing any fixed offer that you may have and your choice of banks offering it will likely be more restricted. What about an Australia mortgage? Still to be researched more fully, but they look much the same as UK mortgages, albeit with fewer options and, of course, there’s the business of proving your income in Australia.

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

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 with some travel money cards.

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 one of the better travel money cards 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 known). 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).Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

Most of the time it’s fine to take a few cards and maybe a travellers cheque with you on holiday, but what do you do if you run out of money when you’re abroad or if your cards/cheques are stolen?

It’s safest to work on the assumption that your cards and/or cheques will be stolen and prepare for that. The way to do this is to keep a note of the card numbers, expiry dates and cancellation phone numbers for each card that you are taking with you. For the travellers cheques you need to note down the cheque numbers and the date & place that you bought them. Take one copy of the note of these details with you (separate from the cards, of course) and leave one behind with a friend or family member. It’s best to cut down on the number of cards too and go with the minimum which is three: one Visa, one Mastercard and one more for when the other two are stolen (keep the third one separate from the other two).

When they are stolen, you just go through the details and call to cancel the cards and cheques. The cancellation numbers are usually reverse charge numbers ie you won’t have to pay to call the banks. It’s useful to look up the number of the international operator and/or AT&T direct number for the countries in which you’ll be on vacation in advance.

In theory, cards can be replaced abroad within 24 hours but this depends on your card, your card company and the banking system in the country in which you’re on holiday. The best cards for replacement are gold/platinum ones but unfortunately they’re also the most attractive to thieves.

However, some countries just aren’t up to replacing cards quite so easily though a combination of language problems and primitive banking systems. Nobody who has stayed with us and had a card stolen in Prague has ever managed to get it replaced whilst they were there.

So what do you do if the card company can’t manage to replace the card? That’s when you need to look into how to get money to yourself from home and there are several ways of doing that which I’ll be covering next.Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

Cash cards are much more limited in function than credit and debit cards but they have one really big advantage abroad: without the PIN, they’re useless and therefore they’re of much less interest to thieves.

Cash cards for international use come in only two versions which are Cirrus and Plus. Both are linked to your bank account although you can also get prepaid versions of both.

These cards can’t be used in shops to make purchases and are limited to withdrawing cash from ATMs. Some banks put these symbols on their cards without considering that it means the cards can be used overseas so the charging for overseas transactions is sometimes less than clear. Once or twice I’ve found banks who were so sure that their card couldn’t be used abroad that they had no provision for making additional charges in their terms and conditions (and didn’t in my case, but don’t rely on that).

Although it’s not always clear, you can use Cirrus cards in all Mastercard branded ATMs and Plus cards in all Visa branded ones. You need to check that the country you’re going to has ATMs (not all do!) as these cards can’t be used over the counter in banks. Also, check that it will be practical to use them eg in India I found that ATMs were not widely available and Rarotonga didn’t have any ATMs until quite recently.

Charges on these are made up of a transaction charge of around 2% with a minimum of £2/$2 plus a foreign currency conversion fee of around 3%. It’s therefore best to make withdrawals of £100/$100 at a time to minimise these charges.

Downsides are basically those charges and the fact that you can only use these cards in an ATM. For those living in the UK, some pre-paid cards eliminate all charges and if you’re in the American military a USAA card works in much the same way. If your bank is a member of the Global Alliance (Bank of America, Bank of Nova Scotia, Barclays, BNP, Deutschebank and Westpac) then you can withdraw cash from one of the other member banks ATMs without the transaction charge (you still get charged the foreign exchange fee).

I’m going to work my way through the various ways you can take money abroad over the next week or two in the travel money series. I’ve already covered cash, travellers cheques, credit cards/charge cards and debit cards and will be covering prepaid cards in the next episode.Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

In many ways this is, for once, an improvement for the customers of the former Halifax but it comes with downsides too.

The range of products on offer is significantly improved with the addition of both a proper Visa card in addition to the existing Visa Electron (which remains the default card issued) and a multi-currency sterling account and a lot more branches in Spain. It’s as clear as mud but the need to keep a balance of 600€ for free banking seems to have disappeared albeit with the downside that there’s now a charge of 9€ per year for the Electron card regardless of balance (replacing the previous 18€ for balances under 600€); it’s 15€ a year for the full Visa debit card.

Probably the biggest downside is that the free transfers from Halifax UK to Halifax Hispania have disappeared so it’s probably a good time to get yourself one of the free FairFX cards and thereby get back your free currency conversions. For free cash withdrawals you can get the CaxtonFX card though their exchange rates aren’t so good therefore it’s probably best to get both cards if you’re living in Spain.

One big difference is in the list of charges. Replacing the Halifax’s previously very clear and short list is a massive 60 page document from Lloyds that throws clarity out the window. It’s certainly complete but I question whether they couldn’t have produced a much simpler and shorter document for normal customers instead of the monster which seems to cover all possibilities from normal people through to major corporate banking.

Overall, I suspect that, for a change, this amalgamation of the Halifax and Lloyds TSB in Spain is probably a good thing for their customers. You can get the freebie currency transfers elsewhere and it frees up the 600€ that was tied up previously to get the free banking, albeit with the downside that you need to fork out 9€ a year.Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.