Foreign Perspectives

Archive for the ‘Banking’ Category

These days most people wouldn’t even think about travellers cheques. After all, surely the pre-paid cash or debit cards are far more practical and they’re accepted everywhere too, aren’t they?

Whilst it’s true that they’re accepted in most places, cards aren’t accepted everywhere. Even in those places where they are usually accepted there are occasional technical problems that crop up, sometimes quite frequently in relatively isolated places where not having an alternative method of payment would cause significant complications for you. Don’t think that these are places that only intrepid explorers will reach because the technical problems can crop up quite often in country areas of the most civilised of countries. Usually, of course, they happen in the most difficult of places and awkward of times.

For most places, you don’t need to consider travellers cheques as a primary means of payment basically because they’re too expensive as they usually involve both costs in purchasing them and again when using them (check if you can use them like cash rather than needing to cash them in a bank branch). However, it’s worth buying around US$250 or so for those awkward times when you really do need them. For maximum flexibility, it’s best to buy Visa or Mastercard branded cheques issued by a non-American bank (Thomas Cook is the brand that seems best known worldwide). Don’t cash them when you get home as they’re valid indefinitely and repurchasing them for each holiday just increases the cost for you.

Keep a note of the cheque numbers, cancellation phone numbers, when you bought them and where you bought them as you’ll need this information if they’re stolen.

So, yes, despite all the promotion of prepaid cards these days, it is worth keeping a few travellers cheques.

In eras of normal economic activity there are always rumours that come true. That interest rates will fall (or rise), that the chancellor is on his way out (or not) and so on. However, it’s more of a problem in times like these.

For example, the West Bromwich building society was rumoured to be about to need a rescue package back in May. In fact, that hasn’t happened and may never happen, yet I’m quite sure that more than a few depositors with the society withdrew cash whilst other potential depositors probably decided on a different building society. So far that’s been “a few” depositors or potential depositors but it could very easily become a tide and fell the society just as happened with the Northern Rock.

And yet, we also get rumours in the other direction. Thus the markets don’t seem in such dire straits lately as they were not so long ago. The flow of companies announcing bankruptcies seems to be slowing (no substantial companies for a while now) and even the housing market may be in the first stages of an upturn.

The problem isn’t the rumours as such but rather that in dire economic times the effect of such rumours tends to be much more extreme than would normally be the case. That’s, of course, why the government tend to be somewhat more reluctant to say anything as it’s extremely easy for an off the cuff comment to be perceived as negative these days. Still, we’re sure to have a new government soon, aren’t we? Or is that just a rumour too?

One of the great things about the introduction of the chip & PIN technology was that it greatly increased security in the sense that you were no longer relying on the shop assistants comparing your signature against that on the back of the card.

If you’d been carrying the card around for a year or two chances are that the signature was barely visible but that rarely mattered anyway given the cursory glance of most shop assistants. Once the novelty value of the photo cards had dwindled it mattered little what photo was on the card although the current rarity of those cards does offer a measure of additional security to those who have them.

However, the problem is that your PIN is required EVERYWHERE. Fair enough when you’re buying something in a shop although it’s a little too easy to watch someone entering their PIN in a lot of locations and there’s a tendency for the person behind you in the queue to get so close that they can easily see your PIN. However, why the need to enter the PIN when you make a deposit in the post office? Not only are post office keypads more visible than most but why the need to identify yourself when making a deposit at all?
After all, the Halifax are able to take machine deposits without a PIN. Why can’t the post office?

If you wanted to send a small amount of money to someone, for most people the simplest thing to do is to either pop a cheque in the post or simply to post the cash. If it’s a large chunk of cash then cheques and bank transfers are the way to go normally.

However, what if it’s a sum that lies in the middle ground and you want to send it internationally? For most people the answer isn’t nearly so cut and dried there. For instance, if you were sending EUR 200 from the UK to France or vice versa you’d be looking at around £25/EUR 20 in bank charges for the cheque or transfer and that’s before you factor in the tourist rate of exchange that you’d be getting.

If it’s a company you’re sending it to then you could use a credit/debit card of course, but that’s not really an option for an individual, is it? Well, actually these days it is as the person you’re sending it to could have a paypal account in which case, if they upgrade it to a premium account, then they could take the money off you at a cost of around 4%.

However, if it’s a family member a more practical way is to pop into the post office and pick up a travel money card and just post it to them. There’s no security risk as you can wait ’til it arrives before enabling the card. It costs around 4% to exchange the money from sterling to euros or dollars and it’ll be £5 or so two years later to renew it.

I came across a rather comprehensive take on how bad things are in the Spanish economy which makes for some interesting, if long, reading.

Spain is one of those places that hasn’t, yet, featured on the news in terms of problems with their banks which is surprising in some ways as it’s not a country that one would ordinarily consider as having strong banks. However, that’s misleading as the countries with the supposedly strong banks have nearly all run into trouble by now but largely because that strength enabled them to start operating on the international stage and thereby pick up problems that they’d not have gotten had they stuck to their domestic market.

Spain is different in that, for the most part, the banks seem to have acted to pull money into the country but that has created something of a problem since, as the article points out, it has created a climate where there’s been a little too much money knocking around. The problem in Spains case is that the developers have used that money to build far too many houses and now find themselves with a rapidly increasing stock of unsold houses.

The solution? Well, the developers would like more money to build even more houses but that glut of houses means that prices are falling rapidly in reality although that doesn’t show up in official statistics as those are based on estimates of the value of the houses rather than what they’re actually selling for. As elsewhere, the list prices of those houses bears little reality to the price at which they are really selling for and therefore it’s very difficult to get a clear picture of what’s really happening. Despite that, it appears that the fall of 50% or so the previous year will be followed by yet more falls to come.

That continued falling of prices spells trouble for the builders. In accounting terms, they’re presently holding them as trading stock but the falls are forcing them to reconsider them as assets for sale. That might satisfy the accountants but unperforming assets are no good to anyone and, of course, they can’t sell them. Nor can they reduce the prices by as much as normal people could because they’d then be into potentially serious losses.

In fact the solution seems to be to let a significant proportion of the developers go bankrupt and reduce building to more normal levels thus letting the stock of unsold homes find buyers. Not an easy solution but then if, as seems likely, we’re heading into a depression rather than a recession then no solution is going to be an easy one… last time around it took WW2 to get us out of it.