The hidden expense of owning overseas property?

Mounting pressure on UK high street banks to be more transparent about the costs of add-on products, fuelled by the mis-selling of Payment Protection Insurance, could lead to an overhaul of banks’ fee structures and the introduction of charges just for holding an account with them – an unwelcome concept, but one that people experience every day when they move or buy property abroad.

British people are often unprepared for the costs and different practices that come with having an overseas bank account, and in today’s tough economic climate European banks are not shy of charging fees at every opportunity. Being prepared and researching your options is as important when choosing a foreign bank as it is any other service provider.

Editor of The Overseas Guides Company (OGC), Richard Way said: “We had an enquiry recently from someone needing to repatriate money to the UK from Cyprus whose Cypriot bank was going to charge around €1,000 just in fees to make the transfer. Fortunately, these people used our partner currency exchange specialist, so saved on the exchange rate, as well as the fees. I’d imagine these people were already paying an annual fee just for having their account in Cyprus too. Charging a percentage of a transfer’s value is not uncommon with European banks – it’s extortionate and unnecessary.”

To save British people any nasty surprises when opening a foreign bank account, the OGC has compiled the below list of things to consider:

1 If you are not moving abroad permanently, your foreign bank account will be classified as a “non-resident’s” account, and your options will be less than if you were a resident. If you are relocating, take your residency card when you open an account, to ensure you are offered a more flexible “resident’s” account.

2 Many European banks charge a collection of fees for having a bank account, especially a non-resident account, which can in some instances, for example in Italy, easily add up to a couple of hundred euros a year. Typically you could be charged a quarterly or annual administrative fee, for having a chequebook, for statements and for withdrawals from ATMs, both those of your own bank and other banks. Check with your bank precisely what you will be charged for and how often – charges can be negotiable and really do vary by bank and even customer. If you are a second homeowner and leave funds in you overseas account to cover bills, make sure there is enough to cover bank charges too.

3 Not all countries are as cheque friendly as the UK, and post-dating a cheque, for example, can be frowned upon. Even worse, a bouncing cheque could land you in serious trouble in some countries. Similarly, going overdrawn is heavily penalised in Europe.

4 Some foreign banks, particularly in Spain and France, offer a service designed specifically for British people, including on-line banking in English and branches with English-speaking staff.

5 Typically in Europe, banks are either large, national or small, regional institutions. In rural areas away from cities, finding a branch of a national bank might be tricky. As a guide, choose a bank with a branch local to your property, so you can deal with any issues in person. Foreign arms of British high street banks operate independently of their UK operations so don’t opt for a bank purely on its name, as there could be no real benefit.

6 Many Europeans banks will offer accounts with special rates for students and pensioners. Retiring expats especially should shop around.

7 If you will be sending funds to your foreign account from the UK, and vice versa, the best way to do this is through a foreign exchange specialist, such as Smart Currency Exchange (smartcurrencyexchange.com). It is worth contacting a specialist to find out which banks in your destination country are the easiest to work with for receiving and sending funds.

8 European banks in towns and villages still operate on a local level. For example, it is not uncommon to be on first name terms with your bank manager and to have a direct phone number for him – refreshing compared to the ‘switchboard culture’ prevalent in the UK today.

Added Richard Way: “There’s little doubt the banking culture in the UK is different to on the Continent, for better or worse, so Brits buying overseas should take nothing for granted. At OGC we can’t stress enough the importance of choosing a bank carefully, as some will accommodate for specific needs better than others, and no one should pay for extra costs when they don’t need to.”