Converting currency from Sterling to Euros and sending funds from the UK to Spain

If you intend to invest in the Spanish property market you will at some time need to transfer funds to pay initially the reservation fee and later the deposit required by the developer.

We were and still are, constantly being asked “what is the most economic way to transfer money to Spain and convert Sterling to Euros”.

Several months ago we arranged a test that examined most of the options available to find out what was the most cost effective solution for you all to use. We checked them all on the same day of course to compare fairly and accurately.

In the near future we will organise another more comprehensive test, but for the moment we have included a synopsis of our findings as you can see below. We will of course publish a detailed report on our website when we complete the next survey.

We have of course transferred funds to Spain on numerous occasions previously, examining the options available at that time. Therefore we already had a good idea what the answer would be, but wanted some confirmation.

Options available to transfer and convert currency

Currency companies and traders
These offer many different options for converting funds and work in a variety of ways but many of them require you to open an account with their company, sometimes depositing the funds with them so that they are available immediately when you want to send the transfer.

It is also possible to forward buy currency i.e. agree to purchase €50,000 at an agreed rate of exchange in six months time. The currency trader will take a gamble on the rate and you will be able to budget accordingly. You could however ask for a quote and gamble yourself using this information to guide you.

We are constantly contacted by a seemingly limitless array of currency specialists and traders each claiming to be the best and offering commissions to anyone promoting their service. What concerns us is that the client will end up paying these fees.

UK high street banks and building societies
All major banks are able to transfer funds overseas and many advertise no fees for conversion particularly on smaller amounts, but if you check the rate out they are making it back in other ways. It is far better to send the funds in Sterling and let the Spanish bank convert from Sterling to Euros when the funds arrive at the receiving Spanish bank.

Spanish banks
Spanish banks are efficient and modern. Nearly all banks will have multi lingual staff and all of the major banks offer internet banking in English with a far more efficient service. If you transfer from one account to an account at another bank the funds will be there usually on the same day. In the UK the money tends to disappear for a few days which personally I find infuriating.

Should you convert from Sterling to Euros in the UK, or when the funds arrive at the receiving Spanish bank?
The larger Spanish banks convert an immense amount of Sterling every working day. Because of this they are able to offer a better rate than a UK bank.

Spanish banks with UK branches
Some Spanish banks have UK branches and offer a no fee payable service if you transfer from your UK account into one of their branches in Spain. You will have to convert the funds form Sterling to Euros in the UK and at the rate they offer however.

Bank fees for transfers
Fees are payable from the sending and receiving bank i.e. you have to pay a fee for your UK bank to send the money and process the transfer and you will have to pay a further fee from the receiving Spanish bank to process the transfer when they receive the funds.

However money can be saved if both of these fees are paid at the UK sending bank as Spanish banks charge a percentage to process the transaction whilst UK banks generally charge a flat fee. You just need to ask for all fees to be paid from the sending bank when you order the transfer.

Our findings

The same amount of currency was used for a quote from all of the companies and banks we approached. All quotes were requested on the same day.

We approached several major UK banks, a Spanish bank that have a UK branch and offer a no fee service to transfer from your UK account to your Spanish one, several high street Spanish banks as well as a selection of the most well known currency companies.

The transfer that came a very close second in terms of bank fees, as well as rate of exchange was to send the funds from a high street UK bank with all fees paid (see above). The funds should be sent in Sterling for conversion into Euros by the receiving Spanish bank. The bank with the best rate on the day was the CAM Bank or Caja de Ahorros del Mediterráneo

All of the other offers achieved trailed behind considerably accept for one which was the winner by a small margin. This was offered by a large currency company, but the catch was that the funds had to be lodged with them and cleared previously in readiness for when you required the transfer. The difference between the previous exchange was also negligible.

Our conclusion then is quite simple. For most cases use a UK bank and send the funds in Sterling with all fees paid by the UK sending bank. If you have more time available and are in a position to lodge the money with a currency trader before hand, or want to arrange an exchange for a fixed date in the future, then phone around and compare fees and rates.