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.

11 thoughts on “Getting paid in Dollars with a UK bank: don’t use PayPal

  1. Mark Baker

    I bank with HSBC (First Direct bit of it) and one bonus if you’re only an occasional traveller to the US is that if you can find one of their ATMs there doesn’t seem to be a cash withdrawl fee. Although obviously you might be able to get a better exchange rate.

    One bank you’ve missed out that’s another ‘international’ bank is citibank, although given their ineptitude and general state of affairs I can understand why ;-)

  2. Andrew Crystall

    Honestly, has this ever been a /good/ idea? (using paypal)

    You might want to investigate some of the European banks, some will denominate accounts in Pounds or even hold joint balances.

    Anyway;

    I pay my web hosting using paypal. Why? Because unlike the other payment options they offer, the fees for doing that are pushed onto them, not onto me. I’d move webhost, but they’re reliable and I have an excellent package with them.

    (The one time they did breach their SLA? They not only sent me a refund but moved my hosting up a tier package for free. Heck, how many $10/month services have a deacent SLA?)

  3. Scott Bilas

    If you’re looking at US banks, I’d check on Schwab Bank (the banking arm of the Schwab investment firm). After doing a lot of research into many different banks, US and international, we chose to switch to them specifically because of their support for international transfers. Very important as we live in Perú.

    I still can’t believe they do this, but when we take out cash here (anywhere in the world actually) they don’t charge a fee. And if the local bank does, and they always do, then Schwab will refund that fee back at the end of the month. We’ve been getting $10-20 back a month so far in fee refunds from Schwab for fees charged by the local banks in Perú. Every single time I’ve gotten this refund my mind has been blown. They do it because they are 100% virtual – no store fronts, no ATM’s. Works out for them I guess.

    Schwab has free wire transfers either outbound or inbound, I can’t remember which way. And of course ACH transfers are free.

    Their customer service people are very nice and helpful too. Again, I couldn’t believe it, but I called their customer service # because we were stuck in Bolivia with no money and a lost card and got right through to a person. No automated switchboard or waiting on hold. That never happened with Wamu.

    I used to have HSBC but got really tired of their horrifyingly bad web site. Got locked out of the stupid thing more times than I can recall. But perhaps you could open an HSBC in the UK for local transfers with your real bank, and then ACH through the HSBC to Schwab in the US?

    [Note of course that I’m a US citizen, so I have no idea what the options are with Schwab as a non-resident. But we’ve loved them so far down here, they’ve been really great.]

  4. adam Post author

    When the browsers all did their SSL GUI updates (Firefox 3, MSIE 7, etc) to make it more “obvious” when a site was phishing / authenticated / (or not) … I did wonder why none of them also added a distinction between

    “secure, encrypted comms”

    and

    “secure, encrypted, authenticated comms”

    ?

    The obvious answer I thought of was just that you’re then giving a false sense of security to people who don’t understand the concept of a man-in-the-middle-SSL attack. At least with the “all or nothing” GUI approach, you’re not risking misunderstandings.

    Oh. Crap. Except … there was the random guy who bought the mozilla.com SSL cert, because they didnt bother checking he even had a valid email address let alone DNS ownership – and yet the cert was valid in the FF client-side cert chain! – around the start of this year. So, in fact, it’s all ****** already :(.

  5. Steven Davis

    I think someone bought a microsoft certificate a couple of years ago.

    The whole PKI model is busted – certificates merely mean that a payment was successfully processed by one of 50 or so dubious certificate authorities at some point (probably within the last 2 years).

    It is a lock without a door.

  6. Dustin

    I looked into dollar accounts a couple of years ago. In the end I couldn’t justify the charges for what I needed, but I do remember that Barclays had good rates at the time if you mostly wanted to keep some dollars sitting in an accout (no/low minimums, low monthly fees, etc.)

    If you do get an American bank account keep a close eye on their exchange rates. A lot of American banks aren’t so enlightened to the world at large and tend to charge very bad exchange rates. Compared to Wachovia, for example, HSBC’s rates are a bargain.

  7. Anon

    Yes, Citibank International is one of the best. With an account balance of £2000 there is no fee and you can link your debit card to a EUR or USD or GBP current account.

  8. Carey

    The Citibank option is what I use, and there is absolutely no charge now. Unfortunately I have to get paid by Paypal (online transactions) and I end up losing money for them still.. For every £1000 it costs me about £65, so in all 6.5% for the privilige of using Paypal as my online payment provider…

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