Customers lose up to 4% when wiring money abroad

Customers lose up to 4% when wiring money abroad
By Suzanne Fenton, Staff Reporter GULF NEWS Published: January 31, 2008, 01:28

Dubai: Expatriates in Dubai lose up to four per cent per transaction when they send or receive money from other countries, according to a recent market entrant.

As an expat magnet, the UAE sees millions of dirhams being wired to and from the country every day. And banks charge a wide variety of exchange rates and commissions, which fluctuate daily.

But, according to Lisa O'Brien, director of First Rate FX, a London-based currency specialist firm with offices in Dubai, by doing some basic research, expats can save a lot of cash when transferring money.

"Often people want to transfer money quickly, and so they get in the habit of calling their own bank," she says.

"But we're currency specialists. We buy large volumes of all major currencies every day. And because of this we can make a huge saving and pass this benefit on to the client."

O'Brien says this is with no commission or any other additional charges.

Lucrative business

Mohammad Ishaq, Head of Treasury at Sharjah Islamic Bank, says: "They benefit from the customer in two ways: When a customer deposits the money, it takes a few days to arrive at the destination. In this time the money is lying in transit and the company makes the interest on that.

"Also, the company buys big amounts of money at wholesale rates, but offers it to the customer at the retail rate - about half a per cent or one per cent, depending on the transaction. This half or one per cent makes a big difference. It's very lucrative for them."

To highlight O'Brien's point, using a High Street bank such as HSBC to transfer £1,000 from the UK to Dubai would convert to Dh7,175 with no extra charges or fees at an exchange rate of 7.17.

Naturally, this is only "an indication for today as prices vary from day to day", according to a bank employee. To send £1,000 from Dubai to the UK, however, would cost Dh7,408 at an exchange rate of 7.41 with an additional charge of Dh80 for sending, amounting to a total of Dh7,488.

Sending £1,000 from the UK to Dubai with a money transfer agency like Western Union would amount to Dh7,220, with the sender paying an additional charge of Dh331 (£47). Sending £1,000 from Dubai to the UK however, would cost Dh7,510, with an additional charge of Dh400, amounting to a total of Dh7,910. Western Union also has a maximum amount of $7,500, with a $310 fee.

Using a specialist company like First Rate FX to transfer £1,000 from the UK to Dubai at a rate of 7.23 would amount to Dh7,230. To send 1,000 GBP to the UK from Dubai would be Dh7,307, at a rate of 7.31.

As foreign exchange is volume-driven, larger amounts would achieve better rates. For example, sending £25,000 from the UK to Dubai with First rate FX would amount to Dh180,957.5 at today's exchange rate of 7.24 with no commission or extra costs. It would take Dh182,272.5 at a rate of 7.29 to get £25,000 from Dubai to the UK.

According to O'Brien, it's a case of taking the time to research the market. "In the UK press, there's been a lot of talk about banks charging too much. So people are becoming more educated to go to specialists instead."