62-year-old David Newman from Hinckley saw £500 wiped off his transfer thanks to currency conversion
An HSBC customer was stung with a £542 charge thanks to currency conversion when an international bank transfer defaulted to UAE dirham, even though the account they were sending money to overseas was a sterling one.
Retiree David Newman was asked by his wife Gillian’s cousin, who lives in Dubai, if he could collect and then send his HMRC tax refund cheque of £9,021.44 to him, as he no longer had a UK address.
His cousin-in-law’s account is a sterling one based in Dubai.
HSBC offers expats that already bank with it access to current accounts in the UAE that can be opened in dirham, British pounds, or US dollars.
The 62-year-old from Hinckley banked the cheque on 7 January and the payment came out of his account a week later, destined for his cousin-in-law’s account, which is also with HSBC.
The bank states that there is no charge at all if you are transferring money to another HSBC account abroad, compared to a £4 fee normally.
However, the next thing David knew his cousin-in-law had contacted him to say that the payment had arrived, but he had only received £8,478.55, meaning a £542.89 – or six per cent – shortfall.
David called HSBC, who initially told him a few days later after looking into it that that was the cost of exchanging the £9,000 into UAE dirham and then back into British pounds.
Because David chose for the beneficiary to pay all fees, this meant the cost was taken out of the amount that was sent.
When David raised the question why, if HSBC knew that the money was being sent to a sterling account, it needed to charge for a currency conversion, HSBC responded with a letter claiming that David had sent the payment in dirham.
It added: ‘When a payment is sent to another bank, we are not aware of the currency of the beneficiary account, so the currency field defaults to the currency of the beneficiary country.
‘If you want the payment to be sent in a different currency, you should select the required currency from the dropdown list.’
HSBC told David that it would automatically default payments made to a different country into that country’s currency, regardless of the currency the recipient’s account was opened with
HSBC echoed this response when contacted by This is Money.
David told This is Money that he ‘categorically denied’ choosing to send the money in dirham, asking why he would send money in dirham when his cousin-in-law’s bank account was a sterling one.
He added: ‘It states on HSBC’s website that “we’ve made it quick and easy for you to send money outside the UK”.
‘We dispute that, as HSBC staff in branch struggle to make international payments.
‘We know this first hand when last week we experienced this in the HSBC Hinckley branch, as a member of staff selected the wrong screen on the first attempt while making a similar payment for us.
‘I feel very cheated by these charges and after 40-plus years with Midland bank, which then became HSBC, I am looking around to move my money and receive better customer service.’
HSBC added that: ‘We strive to make the transaction process as clear as possible and ensure there are various check-points for the customer to confirm that the request is completed per their wishes.
‘I appreciate this doesn’t help Mr.Newman, however I do think it’s worth mentioning that if a customer is unclear on something or has any questions or concerns, we recommend they contact us.’
Beating the conversion trap
Sending money abroad can be a pain and, as the above shows, can sting you with expensive conversion charges if you make a mistake.
However, there are ways to do it that can save you money.
Challenger bank Starling announced this week that it was launching a euro account that would let you hold, send and receive euros for free, and that account has no upper limit in terms of how much you can hold.
Other digital firms including Revolut and Monzo also offer some of the better rates if you’re wanting to send money abroad.
Revolut sends money using the interbank rate, or real exchange rate, and doesn’t charge you fees up to £5,000 a month. Beyond that it tacks on 0.5 per cent per transaction.
Monzo meanwhile uses TransferWise, a peer-to-peer service that offers a ‘guaranteed rate’ for 24 hours that is close to the real exchange rate, and then levies a 0.35 per cent fee +80p on transactions.
Wire transfer stalwart Western Union also offers among the best rate and charges no fees on a bank transfer to a foreign country, but it isn’t the interbank rate.
Those are your best options, but we break down all of the alternatives here.