Stop Banks from Cashing in on Your Company’s International Payments

Part Two: How to reduce fees

Many British companies make payments to or from the UK and in the process they unintentionally lose money. In some cases, losses can be up to tens of thousands of pounds! This is part 2 of a special 4-part series that has been written to outline how the bank-to-bank international payment process works, the specific areas where companies are losing money, the actions that can be taken to alleviate losses and ways to ensure the process is safe. At the end of the article, there are details on how you can download the full series.

In part 1 of this series, I explained that companies send and receive money to and from the UK in large lump sums (for buying, selling or distributing products, parts or services internationally) and regular payments (for services rendered on a regular and ongoing basis for example). My main premise in part 1 is that the actual process of moving money isn’t rocket science, however the commission, currency exchange rate and fee structure imposed on clients by the banks can be extremely confusing. Rather than using a bank, there are specialist international payment organisations that assist their clients to save substantial amounts of money throughout the process. One of the ways in which they do this is to offer better-than-bank exchange rates. For every £1,000 exchanged the savings on better rates could be up to £40 – extend that over a series of payments, or on one large payment and it can really add up.

To continue, another way that banks profit from their clients is through various charges throughout the money transfer service. The charges imposed often include a fee to purchase foreign currency, another fee to send the funds and a charge from the overseas bank for receiving the funds. Before you know it, you can easily lose around £50 - £100 in fees for each and every transfer.

When working with an organisation that specialises in currency exchange and international transfers, you’ll discover various methods of reducing and often eliminating fees. For example, when transferring funds from the UK to Europe through a bank, you’ll often be charged £20 to £30 for the privilege. However, if you transfer funds from your bank using the Internet or Fast Payment system to a currency specialist, it’s possible to completely avoid the charge.

As for charges concerning the movement of funds overseas, most currency payment specialists charge a nominal value if the transfer is under £3,000 - getting better-than-bank exchange rates more than compensates for this small administrative fee. And all transfers over a particular amount, say £3,000, are sent free of charge. It’s important to note, however, that not all currency specialists will help their clients with regular low payments (for example, under £500).

The bank receiving fee can prove the most costly of all. Most companies aren’t even aware that this exists until they have an angry supplier or client on the line complaining of a short payment! European Law dictates that receiving banks are allowed to charge a ‘nominal fee’ on amounts under €50,000. ‘Nominal’ is open to differing interpretations and can vary considerably. If you are going to send regular payments, it’s often a good idea to remind your client and/or suppliers of this fact and suggest that they check with their bankers. In Spain for instance it’s not uncommon for banks to charge 1% of the value of money coming in or going out, so by comparison the charges that some UK banks make aren’t that bad.

With regard to receiving bank charges, some currency exchange and transfer specialists agree to absorb this fee – it’s best to check with them when booking your transfer. Whether you need to make a series of large payments or several transfers throughout the year, avoiding or reducing the various charges that the banks impose can save a lot of money. By researching the bank that will be receiving your funds along with working with your payment specialist, you could save money and boost profit margins.

In Part 3 of this 4-part series I will explain an option that companies find extremely valuable as it allows for securing set exchange rates for the future. This in turn helps companies to formally set budgets that won’t fluctuate when exchange rates move.

Call Smart now for more information on 0845 638 0571 or visit http://www.SmartCurrencyBusiness.com