Foreign Exchange

The process of taking money into Spain is not too complicated but once you're starting to deal with larger sums it can have a large number of hidden costs. The first thing is not to get hung up on commission rates - for larger sums this is almost irrelevant.

The key number you need to look at is the difference between the exchange rate you are offered and the current market spot rate. Checking one against the other can be difficult, and obviously people selling you the currency will not really want you to look. In our experience the rate you get from the bank will be around 3% lower than the market spot rate. It doesn't sound much does it? But 3% on £100,000 is £3,000. Commission at say £65 is trivial by comparison.

It's not just large sums either. In general, every time you take money out of a UK cash point you will be 3% below the existing exchange rate. Most people don't notice, but that's a hidden £3 charge on every £100 you take out (and if you don't use your own bank cashpoint, there'll be another 2% for using someone else's ATM - £5 on every £100).

For larger amounts of currency you should keep an eye on the exchange rate (eg use the Financial Times website) and then get a quote from your bank. Our experience is that even for large amounts of money, then bank still expects to take 3% off the exchange rate.

The alternative is to use a specialist foreign exchange broker. We've found UKForex to have the best rates (typically between 0.6% and 1% off the current market rate). You also might want to look at HiFX. It's a bit traumatic making the charges but we've done this twice and there have been no problems.

The last part of hidden charges comes from your receiving bank. Spanish banks load up charges all over the place. We discovered, when it was too late, that our bank made no charge for receipts up to €50,000 (there's an EU directive that forces banks to match internal country charges with external charges up to this amount). But for amounts above €50,000, it charges 0.4%. Once again this doesn't sound much, but on a figure of €100,000 thats €400 Euros - for just putting money INTO the bank account. We pre-warned our bank but they seemed careful not to mention charges.

AND when you actually pay the money out again, you'll get stung by another 0.4%. So on €100,000 the bank will take 0.8% or €800 just for money going into and then out of your bank account (do the sum with the full price of a house to see what a scam this is - it will probably be more than your total legal fees, and there at least you have someone working for you). It's also much more than you would get on interest.

We're trying to recover the money. If we can't we'll name the bank.