How to beat the bank...on your year abroad

I’m only 21 years old yet I have already too many years under my belt of battling with banks.  Security checks, payment verification, “lost” cheques, money-laundering investigations, withdrawal charges, international payment charges, shit exchange rates: I’ve seen it all. Unlike the other 80% of Warwick Business School, I am proud to say I hate banks. For me, the case has been both nature and nurture. An afternoon with my granddad just wouldn’t be the same without his rant about the thieving bastards, just like an afternoon at the bank wouldn’t be the same without its customary disappointment and frustration.

Students, I believe, are the perfect victim to the banks (along with poor old grannies). The windfall of money from student loans plus the sudden autonomy in living outside of the family home, multiplied by our relative inexperience in the world of banks is the recipe for a rip-off.

Today I’m not going to talk about the best cash ISAs nor will I hark the usual warnings about black hole overdrafts. Instead I’m going to tell you how to beat the bank, on your year abroad or Erasmus placement.

Know what to expect

Who doesn’t love the idea of jetting off to Spain for a year part-way through their degree? Paying only half fees in a place with a lower cost of living, whilst receiving your usual loans as well as an additional Erasmus grant to pad your wallet, you might feel the financial situation is rather jammy. However, at the point when you apply for your Erasmus grant and student loan, you are still in England, so all that money is sent to your English bank account.

Prepare yourself for nasty surprise number one: Using your card abroad is really expensive. In my case, when I last used my Halifax card to take out 300 euros of rent, I was charged a flat fee of £1.50, plus they used the exchange rate of 1.21798. When we compare this to what the exchange rate truly was that day, 1.2572, we can work out they wangled an extra £7.68 out of the transaction. In essence, I was losing over £8.00 every time I withdrew 300 euros. 

After being robbed of about £50 for a few months, my answer was to open a Spanish bank account, put my money in there, and then use the debit card whenever I liked. Then came nasty surprise number 2: Sending money abroad is really expensive. Again, like most other banks, Halifax insisted on charging an extortionate £9.50 flat fee, with the rate of 1 GBP = 1.1056EUR, when the day’s rate was roughly 1.167!

My second piece of advice now is: look elsewhere. Don’t be bullied into accepting these outrageous charges – there is an alternative. A quick browse online taught me about money transfer services. I went for TransferWise as it was FSA authorised, highly recommended, charged the lowest fee and seemed the most user-friendly to a non-financey person like me. These fine people only charged me £1.99, and used the mid-market exchange rate to process my transfer. At the end of the deal with TransferWise I receive €464.36 for just £440, compared to the €442.24 euros I would have got with Halifax.

Of course, about now there will be some more clued up smart asses saying “But the UK is a SEPA country and you can open a euro-bank account in England too.” I also investigated this and Halifax seems to have out-sourced this functionality to Lloyds TSB. Unfortunately, in order to set up a euro bank account with them and get free international transfers, you have to have an annual income of £50,000 or have £25,000 to deposit within 3 months of opening the account – which disqualifies us poor students. 

I hope this article has opened the eyes of some year abroad students that there are alternatives to big name high street banks and that it really doesn’t take a degree to save you some money!