Getting paid in Dollars with a UK bank: don’t use PayPal

Introduction

I travel to the USA frequently, both for conferences and for business/meetings. On each occasion, I spend anything from a few hundred dollars to a few thousand (sometimes the hotels are paid in dollars, sometimes part of the airfares, plus all the spending for the duration of the visit).

Over the years, I occasionally received payment from USA companies, although in the past year this has become more frequent. Obviously, it’s stupid for me to pay the exchange rate premium twice (once in each direction) AND pay commision (twice!) AND pay any bank-specific charges for the priviledge – when I’m actually guranteed to spend those dollars sooner or later as actual dollars.

I asked my UK bank (Halifax) about opening a dollar account. They claimed to have never heard of such a thing, and had the temerity to open a browswer window and go surfing on Google to try and find out if it’s a service they offer (they offer at least three different services along those lines – Halifax’s head office should probably put a call through to the Brighton branch-manager and ask why they have untrained staff manning the branch at the moment).

So I went looking into the alternatives myself. The main things I need are:

1. Deposit money in dollars (preferably by transfer from other people’s USA accounts)
2. Deposit money in sterling (I’d avoid this, but it might be necessary if I have a lot of USA spending to do at some point)
3. Withdraw dollars from ATMs in the USA
4. Transfer money in dollars to other people’s USA accounts (payment for services etc)

PayPal

Cash withdrawal: 3%
Cash deposit: 3.4% (2.9% if you take > $25,000 per annum)
Cash deposit own currency: 3%
Transfer to other person: free
Annual fee: £2.50/year surcharge for owning a debit card (the credit card is “free”)

Total: 6.4%-12.5% + £2.50 per year is taken by PayPal

Verdict: PayPal is a rip-off. They carefully hide their true overall charges. You should avoid them like the plague. Bear in mind that – in total – that’s one eighth of ALL your money that you’re “gifting” to PayPal in reutnr for, well, nothing really.

Lloyds TSB / Bank of Scotland / Halifax “International”

Minimum cash in account: £1500 (NB: their website claims otherwise, but the website is wrong)
Annual fee: £90.00
Cash withdrawal: 1.5%
Cash deposit own currency: £10 + 2% (min: £13 fee per deposit)
Transfer to other person: 0.25% (min: £13 fee per transfer)
Transfer from other person: £7
Cheque deposit: £2 per cheque

Total: 1.5%-3.5% + £17 (or more) + £90 per year is taken by Lloyds

Verdict: as the Lloyds website asks “Why bank in other currencies?” Why, indeed – the bank is going to rape you for all you’ve got, and do its best to take more money from you than your government takes in taxes. It’s also worth noting that although Lloyds has a page dedicated to comparing their service to their competitors, it’s incorrect both about their services and their competitors; generally, I’m used to such false claims being illegal. Oh well. I certainly wouldn’t trust anything else they say having seen that.

PS: their pre-tax profits in 2008? $3.5 billion. I wonder why?

Halifax “National”

Halifax refuses to provide any information on their website.

Verdict: why do they keep this secret? Would they rather rip you off, and have you find out how much money they’re going to take from you only after you’ve actually paid it (which sounds pretty immoral to me)?

As noted above, the branches are unaware of their own services, and are effectively useless here.

Short of snail mail, and waiting months for an answer, the only way you can find out is to phone a pay-by-the-minute premium phone number and go through an automated system. Yes, you have to pay for the priviledge of finding out how much they’re going to charge you. Forget it.

HSBC “Offshore”

Annual fee: £240 (or “free” if you have over £25,000 with HSBC)
Cheque deposit: £30 per annum
Cash withdrawal: 2% (min fee $3) (NB: you have to pay this even from HSBC’s own cash machines!)
Cash deposit own currency: free (I think?)
Transfer to other person: £15 (to HSBC bank), £25 (any other bank)

Total: 2% + £25-£30 (or more) + £240 per year

Verdict: HSBC is a major bank in both the UK and the USA. There is no excuse for them double-dipping and charging UK customers punitive fees for USA transactions (e.g. they will charge you to use an HSBC cash machine, in the USA, to withdraw dollars from a dollar account!). It’s particularly amazing that they charge you £15 (approx $20) just to do a funds transfer to anyone else who has an account WITH THE SAME BANK.

HSBC “Current Account + Internet Banking”

Annaul fee: free
Cheque deposit: ? (HSBC website refuses to say)
Cash withdrawal: Unknown, almost certainly “punitively high” (HSBC website refuses to say) + 2%
Transfer to other person: ? (HSBC website refuses to say)

Total: (guesstimate): 5% + £25 (or more) is taken by HSBC

Verdict: the “Internet Banking” service claims to come with commission-free currency transfers. Except that you won’t be allowed to do cash-withdrawals from an Internet Banking account – and it’s anyone’s guess what they charge. Given they double-dip their own customers on the “intended for people wanting to pay in dollars” account, you can safely assume that the charges for doing payments this way will be high; bear in mind there is an *additional* 2% charge on top of whatever else they charge you.

Wells Fargo – non-resident bank account

I thought that post 9/11 “open a USA bank account, in the USA, as a non-resident” would be effectively impossible.

Apparently, it’s more straightforward than most of the existing options for people who already have accounts with their own banks. The only tricky part is filling out W8-BEN forms to do with tax withholding and/or obtaining ITIN numbers (that the USA government issues to foreign nationals so that they exist inside the USA taxation system).

If you’re an iPhone developer like me, then this is a pain you have already been through, and you’re something of an expert on it (it’s necessary for any non-USA based new iPhone developers if they want to sell iPhone apps). So, actually, that doesn’t intimidate me.

Essentially, you just need to download and process the application form here (*full* details on what is required are included inside the form itself):

https://www.wellsfargo.com/downloads/pdf/com/inatl/ipb/wellsfargo_ipb_indi_download.pdf

Verdict: …this is going to require some additional investigation, as I cannot find info on the WF website to confirm/deny the charges etc levied (or not) for use of this account. But I’ll come back and re-edit this later if/when I find out the actual info for non-residents.

Conclusions

PayPal – don’t make me laugh (actually, it’s more likely to make you cry). This is absurd – more than 10% of the money you put through PayPal gets siphoned off if you’re stupid enough to try and spend it as cash. I think I might need to have a word with my PayPal using friends who do this occasionally, and point out to them quite how much money its costing them.

NB: I have one good thing to say about PayPal: the “total fees” only took ONE instance of ignoring their misleading/false front-page claims, and less than a minute of digging, to find the “real” figures. This compares very favourably to the banks where it took typically half an hour or more, plus ignoring many false statements, to seek out their weasly smallprint and find the “real” figures.

HSBC – If you’re cycling les than about $10,000 per annum through your dollar account (i.e. the amount you actually put in AND take out), then the HSBC Offshore account probably isn’t worth it – the punitive double-dipping charges, on top of the annual account fee, exceed the punitive one-off fees you’d get from using a “normal” sterling bank account and just taking the painful hit on foreign exchange commision fees.

Alternatively, if you are willing to leave more than $100,000 sitting stagnant in HSBC banking accounts, many of the charges become free, and the overall charges are reasonable. But it’s pretty expensive to put that much cash in a bank account these days given the state of the financial markets.

Lloyds – At current interest rates (3%), that £1500 in-account is costing you £45 per annum. At more normal interest rates, its costing you closer to £100 per annum. Factoring that in, it’s just as expensive as HSBC, except they charge you a much higher “tax” in percentage terms, and charge a 30% lower “fixed charge”. The tax is probably going to dominate, so I’d guess that it works out as even more expensive tha the HSBC account.

Final conclusion

UK banks apparently don’t want their customers to do business with the USA. They go out of their way to make it punitively expensive (and excessively convoluted – it has taken huge amounts of effort to obtain all the above information).

This is absurd, especially given the favourable exchange rates right now.

USA banks FTW, I guess. I’ve emailed some questions to Wells-Fargo, and we’ll see what they come back with.