Hidden international banking fees
How often has it happened to you that you made an international payment outside of the Euro Zone only to find out later that not all of your money arrived?
Or suddenly at the end of the month you see some unknown fee on your bank receipt?
It makes you wonder what went wrong. You know what your banking fees are, so it must be the fault of the bank which received the payment. Maybe the receiving bank is very expensive, or they just thought that you wouldn’t notice. But you did notice and now you’re wondering
Sorry to bring it to you, but if this has happened to you it is actually your own bank to blame. Your bank prefers to hide the extra costs they make when they don’t have a direct partnership with the bank that you want to send the money to.
If your bank doesn’t have a partnership with the receiving bank, they will look among their partner banks for one that does. This bank in question will be the correspondent or intermediary bank. Your bank now sends your payment at a lower rate to their intermediary bank, which sends it to the receiving bank.
Three mayor problems with this construction are:
1- Most banks don’t inform their clients before using an intermediary bank (even if you ask them they sometimes try to avoid the question)
2- The intermediary bank can charge you any rate they want without having to ask first for your permission
3- It happend a few times that a USD payment from clients from the USA got converted into Euros by the intermediary bank in Switzerland before it was sent to our account in the Netherlands. A Euro transfer in the Euro Zone is for free, but their exchange rate was terrible and we had also asked to receive USD and not Euros…
We know of clients who successfully complained to their banks in Europe and in the USA and got part of their money back, but most people were not that lucky.
Before you make any international banking transfer be sure to ask your bank:
• Does your bank have a direct partnership with the receiving bank?
• If you send a different currency, what will be the exchange rate?
• How much will this transaction cost? They will not be able to tell you how much the receiving bank charges, but they will be able to tell how much they charge and if they need to use and intermediary bank. If they use an intermediary bank, the costs can be double. You pay your bank for sending the money, then the intermediary bank for receiving and sending the money and the final bank for receiving the money. The total in, combination with a bad exchange rate, can be more than a 100 US$!
More information about different ways to make international payments:
When you make an international wire transfer (SWIFT) you can choose who pays the transfer charges. Those payment instructions are called: OUR, SHA and BEN.
• OUR instruction means you pay all transfer charges and the receiver receives all your payment. We and most other companies prefer this method of payment because of the problems written above.
• SHA (shared) means you only pay your bank’s outgoing transfer charge. The receiver receives your payment minus the costs from their own bank and all the costs of the intermediary bank.
• BEN (beneficiary) means you do not pay any charge. The receiver receives your payment minus all transfer charges.
You can find these codes below in our example SWIFT instruction, at field 71A “Details of Charges”.
Example of an unfair international bank transaction
The receipt in combination with the SWIFT transfer example below shows how two of our clients were wrongly informed by their British bank.
Because they’re British we thought the transfer would be cheap, so we told them that they could use the SHA option for making their payment to our Dutch bank account.
But we were wrong. After our clients made their payment to our bank in the Netherlands their bank gave them the following information (all personal information below has been changed):
Payment details
From: 1ST ACCOUNT .5277 (First Direct bank, part of HSBC)
To: Fairtravel4u N L95RABOo1 09065824
Debit amount: GBP 812.85
Payment amount: USD 1020.00
Exchange rate: GBP 1 = USD 1.254849
Beneficiary details
Full name of the person you want to send money to: Fairtravel4u
Nickname: fairtravel
Address line 1: Martijn Steiin
Address line 2: Jan van Gentstraat 35
City: Petten
Post/Zip code: 1755 PB
Country Netherlands
Fees
Fees paid by: SHA – I want to pay the first direct Fees
First Direct bank will charge: GBP O.OO
Beneficiary bank details
IBAN: NL95RA8O0109065444
Bank name: Rabobank
Bank address: Croeslaan 18
Bank city: Utrecht
Bank Post/zip code: 3521 CB
Bank country: Netherlands
The receipt above would indicate that the bank from the client doesn’t charge any fees for sending the payment in SHA service: GBP O.OO. This is a bit strange, but who knows.
However, when the payment arrived on our Dutch account, we only received 995.00 USD. Our bank charges 7.00 Euro for receiving international transfers and only at the end of the month, so what had happened with the missing 25.00 USD???
In the SWIFT code below you can find the answer to that question…
SWIFT OUTPUT MESSAGE TIJD: 2019-02-07 14.45.17.95
{1:F01RABONL2UBXXX0112629000}
{2:O1030845190207CHASUS33NXXX03541262942902071444N} < –> This means that the intermediary bank is called: “J.P. Morgan Chase ’’
{3:
{108:4777900038FC}
{111:001}
{121:5245b9ac-0482-40a2-86aa-bd26c3fada34}}{4:
:20:4777900038FC
:23B:CRED
:32A:190207USD995,
:33B:USD1020,00 < –> Original payment made by clients
:50K:/40477851544187
MRS JOKE BROWNS MR JAN BROWNS
100 THE STREET NOTHINGHAM
NR11 8AX GB
:52A:HBUKGB4B
:59:/NL95RABO0109064834
FAIRTRAVEL4U
MARTIJN STEIJN
JAN VAN GENTSTRAAT 35
PETTEN
:70:/RFB/RBF07029HE3IYSOW
JAN BROWNS TOUR
:71A:SHA < –> Transfer cost selection from clients
:71F:USD0,00 –> Sending fees charged by bank from clients
:71F:USD25,00 < –> Fees charged by intermediary bank
:71F:USD0,00 < –> Receiving fees charged by our receiving bank from Fairtravel4u
:72:/INS/MRMDUS33
///CHPREF/0218426
-}{5:{CHK:B0E6D6F86F7E}}
{S:
{SAC:}
{COP:S}}
As you can read above the 25 USD costs were not mentioned in the original receipt which the clients received, but the intermediary bank charged them anyway. It is also still possible that the intermediary bank has charged the clients for receiving their payment, but that isn’t possible to see in this SWIFT code.
Below you can find more information about what all the different numbers in a SWIFT code stand for:
Code: Stands for:
:20 Transaction Reference Number
:23B Bank Operation Code
:32A Value Date / Currency / Interbank Settled
:33B Currency / Original Ordered Amount
:50A, F or K Ordering Customer (Payer)
:52A or D Ordering Institution (Payer’s Bank)
:53A, B or D Sender’s Correspondent (Bank)
:54A, B or D Receiver’s Correspondent (Bank)
:56A, C or D Intermediary (Bank)
:57A, B, C or D Account with Institution (Beneficiary’s Bank)
:59 or 59A Beneficiary
:70 Remittance Information (Payment Reference)
:71A Details of Charges (BEN / OUR / SHA)
:72 Sender to Receiver Information
:77B Regulatory Reporting
We understand that banks are businesses and need to earn money we would only like them to be more open about their actual transaction fees, especially with international transfers in different currencies.
We hope that this article can help you to safe unnecessary banking fees, but still recommend you to keep questioning your bank. If they stay unclear and/ or expensive, you might look into one of the new online banks like Transfer Wise.
