North to South currency exchanges: money is falling through the cracks in the border

I have recently started a new job in Northern Ireland. It has not been any great move; on our little island only an hour and a half’s drive from Dublin results in a new currency and jurisdiction. Still I’ve been surprised to find how difficult it is to transfer money online from a Northern bank account to a Southern one without incurring a ridiculous fee.

I have expenses that must be paid in both the North and the South, in Sterling and Euros. Thus like many people I have a bank account in both states. I also have a full-time job that makes it difficult for me to physically visit my banks to withdraw and lodge money. Instead I am an enthusiastic user of online banking, a service that consumers now view as standard and expected. Despite the fact that some taxpayer-funded Southern institutions have the gall to begin charging us for this service, a large portion of society now perform most of their banking online. So I was surprised to find that it is not possible to move money online from an account with a bank in Newry to an account in Dundalk, ten minutes drive away from each other, without being charged a ridiculous international transfer fee.

I can transfer money online from an Irish Euro account to Romania for a smaller fee than to transfer money to Northern Ireland. All EU countries except the UK are subject to SEPA, the Single Euro Payments Area initiative. SEPA dictates that a bank must charge the same amount for SEPA Euro credit transfers as they charge for domestic credit transfers.

Although there are vaguely less costly ways to transfer money cross-border, including by bank draft (which generally involves a £5 or £6 charge) or by physically withdrawing and lodging the money (where travel expenses alone will add up), I must stress that I am only concerned with what options are available online. So what options currently exist for the Northern employee with Southern bills who is tech savvy but time poor?

I bank with Bank of Ireland who as it turns out are one of the least helpful institutions on this issue – you simply can not make cross-border transfers online with this bank, even though they have dedicated northern and southern branches. I found it a challenge to gather comprehensive information on any bank’s transfer rules but eventually a BOI advisor was able to explain that the only way to perform such a transaction was through a bank draft at a cost of £10. The receiving bank in the South would then charge a commission as well as its own (usually unfavourable) exchange rate – if you moved money from BOI North to BOI South that commission would be 1% of the overall transfer on top of everything else. Expensive.

AIB do thankfully offer an online cross-border transfer service. Transactions are completed through their Paylink service. Again these are performed according to the bank’s own unfavourable exchange rate. High Street banks rarely offer competitive rates to consumers; they make quite a substantial profit from the general public’s purchase of currencies that are initially bought by banks at a lower market rate on the interbank market. Unfortunately a standard charge of £15 applies to Sterling-to-Euro movements with AIB and a €15 charge is applied vice versa. Ulster Bank operate a similar scheme; you can make cross-border electronic payments but they will cost you £18.75 per transaction. These fees are still too hot for my blood; I want to move money regularly so need a cheaper option.

Our country’s banks should be able to provide us with this basic service for a reasonable price. They do not and so I was forced to explore less familiar options. I had only come across Paypal in the context of eBay payment options but it is championed online by foreign exchange enthusiasts. By establishing two PayPal accounts, one in Euros and one in Sterling, and attaching them to two different bank accounts, users can perform cross-currency transfers online for one of the lowest going rates. Paypal do not charge a transfer fee for this but instead will charge an extra 3% commission on top of market currency rates. This is still a reasonable rate. When looking at any transaction involving currency exchange it is important to take note of both the transaction fee and also the competitiveness of the exchange rate.

The most competitive options that I stumbled across were offered by online currency exchange companies, of which Xe.com appears to be the most popular. Xe’s service requires you to wire your chosen sum to them (which can be done online), for which there is no fee. They convert this to your desired currency at a very competitive rate, as the company specialises in foreign exchange and does not have to cover the same overheads generated by a bank. If you are changing Euros into Sterling you can even wire the exchanged money to your UK bank account for free, through Xe’s EFT service. If this seems too good to be true, regretfully it is. This free EFT process seems like a loss leader designed to attract customers, because there is still a charge to wire Sterling into an Irish account, and for many other types of currency exchange; only certain countries can avail of Xe’s services while avoiding some kind of transfer fee. But this fee is still low in comparison to what you would experience with a High Street bank. Xe also offer a draft option, where your exchanged money can be posted to your bank in draft form for free. This is a much slower method but since the majority of Irish banks do not charge a fee to cash Euro drafts, we are in the money; here, at last, is a low cost option for moving Sterling into Southern Euro accounts.

Bless the UK Post Office because they also offer a somewhat free service. No fees are applied when sending or receiving money from a post office account, transfers can be made online or by phone and they charge no commission on transfers. Their exchange rate, while not as competitive as currency specialists Xe, is at the time of writing reasonably good. My only issue with the Post Office’s service is that they require a £250 minimum transfer amount for every transaction; given that the median UK salary is only £26,000, this is quite a sizeable amount for the average Joe.

There are still other routes available, including smaller online companies and global banks with internationally-themed packages. However the majority of these feature tricky criteria, as with HSBC who offer free international transfers at a low rate only to Premier customers, those with a running balance of £60,000 or more. The other options that I have discussed are the most realistic and viable solutions for the Northern Irish taxpayer with Southern bills. It is frankly ridiculous that our own banks don’t offer this service for free – the customer should be entitled to expect this as a matter of course.