Foreign Perspectives

Archive for the ‘Business’ Category

When the Economist mentions something in several different articles it’s a pretty good bet that the something is in big trouble.

Last week they opened with a potted summary of the emergency support fund being set up by the Euro zone governments in an effort to patch up the radically different speeds which they’re running at. Then there was the leader urging leaders to forget about the option of breaking up the Euro and how dire it would be for a time. Finally, there was the briefing going through how it would be done and how difficult it would be to do.

The problem with the emergency fund being explicitly set up is that everyone knows just how much money is in the kitty. That’s sure to prompt some people to stretch that kitty to the limit whether they be speculators or governments wishing that they could just devalue.

Listing the processes necessary to recreate an old currency is frankly just asking for trouble. As they point out, doing so would cause massive upheaval in the financial markets lasting years and knock-on consequences of the real economy in the country doing it internally and through difficulties in trading with other countries during the change-over period. Unfortunately, those countries are already facing years of upheaval and austerity budgets and moreover their country’s finances will be run by un-elected officials from other countries during that period. Wouldn’t the upheaval in recreating their own currencies be worth it for them? At least they’d be able to have a real say in how their budget was run.

One of the major problems they foresee is the logistics of printing the new currency in secrecy. Unfortunately, there is one Euro zone country that doesn’t need to do that. Ireland’s banks already print sterling notes and one, relatively doable, option would be simply for Ireland to revert to their former linked currency explicitly, at least for a while.

So, will it be Ireland that will pull out first? Whoever it is, they seem unlikely to be the last.

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).

We signed up again for Fitness First again way back at the start of August when they’d one of their offers running… “sign up for BodyFirst, get three free personal trainer sessions by paying £35 now and you’ll get it refunded after 20 sessions”. Well, that’s what we were told at the time anyway.

It turns out that we should have been given a card to stamp for each of those 20 sessions which presumably lists a couple of extra conditions that we weren’t told about. First, those 20 sessions had to be taken within 8 weeks of signing up. That shouldn’t be a problem as we were attending 4 or 5 times a week so those 20 sessions were completed in late August or possibly early September. Except that 1) we didn’t have that card to get stamped, 2) their computer was down quite a bit towards the end of August so our attendance wasn’t recorded and 3) it’s quite common to get waved through without the membership card getting swiped. Net effect of that was that we have only 16 recorded attendances in the 8 weeks ie they swiped the card just twice a week on average.

Second problem was those “free personal trainer” sessions. It seems that they weren’t optional as, presumably was stated on the card which we didn’t get, not doing them within the 8 weeks means no refund of the £35. On that particular point, we were explicitly told by the membership guy at the time that we could take them at any time so I guess he doesn’t read the contracts that he’s signing people up to.

I’d say at this point that it was important to read all the conditions of a contract with Fitness First but seeing as we weren’t given the contract, we couldn’t do that.

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.

The web applications course threw up an interesting possibility for the adsense last week which looked potentially really profitable so I thought I’d try it out.

Basically the theory is that if the ads on your site are more visible then people will click on them more often and therefore increase the income. There are limits to this though as it’s easy to move from “more visible” to “too visible” and thereby lose visitors.

What the course showed me was a way of keeping the ads on-screen all the time but in a not overly annoying way. As the screen concerned is sometimes very long and the current ads were simply scrolling off it, this seemed like a sure-fire way to increase the income.

What it didn’t allow for is a quirk of adsense which has the effect that the highest paying adverts are inserted into the first adblock that adsense finds on the page. This meant that those ads went straight into the new adsense block. Not necessarily a disaster in itself but the snag was that the click-through for the new block was less than half that of the original block. Moreover, the clicks were split between the two of them. The net effect was that the income dropped somewhat.

Whilst you might think that this was a failed experiment, it wasn’t. What it showed me was that keeping the ads visible is, in principle, a good thing. However, what I need to do is to keep the big paying block on-screen rather than adding a new one so that the highest paying ads stay there rather than introducing a lower click-through ad that captures the higher paying ads.

I think a bit more thinking is required before the next experiment.