Last time I wanted to send money home to my family in Dubai from the UK I realized I am overpaying in comparison to my peers who send money to their families and North America. That infuriated me, but moreover, I was disappointed with myself, as well as with my bank that the fees were not clear at all. When it said the cost of a bank to bank transfer to a location abroad is £25 per transfer I thought it’s a pretty fair price. Each of my semi-annual transfers was approximately £14,000 consisting of all my unused savings, and £25 seemed like a fair 0.02% of the deal.
The thing is that the rate provided by the bank is nowhere near what it should be! For example, currently, March 28, the GBP to AED rate is 4.83 but if I were to use my bank to transfer money back to Duabi I would have received a rate of 4.69 which seems close enough but at the end of the day, if I were to move my normal amount of £14,000 I would have received only 65,591 Dirham (or 65,542 after deducting the transfer fees). In fact, the amount I should have received is 67,622. So I lost approximately 2,100 in each of these transfers. I have been using my British bank to transfer money to the UAE for the past 8 years of working abroad and I probably lost as much as 33,600 AED which is what I manage to save every 3 months.
To add insult to injury, I realized that not only bank rates are sub-par, but they are particularly poor on middle eastern currencies. If you want to transfer your Pound Sterling to Euro you will end up paying about 2% of the transfer, which is still a lot, but not as much as 3%. I thought this behaviour is discriminatory but after a long back and forth with my bank I managed to get someone from the FX desk to address my inquiry and he said that since the AED is an exotic currency which costs more to hedge, the markups are bigger. Whether there’s a reasonable justification to the fact that exchanging currencies to AED are more expensive than other currencies or not, the overall markup is unreasonable. Why would banks make so much money off of one transaction? Keep in mind that some people are transferring as much as £100,000 in one go for a variety of reasons, a British bank would make more than £3,000 or 14,500 Dirhams for something that is all conducted automatically with close to zero risks.
At the point in time where I learned that sending money home to Dubai is this expensive, I immediately looked at other banks. To my dismay, it seems these sort of practices are common and every bank I tested did not have a clear fee structure for an overseas transaction. At the end of the day, after much research, I came to realize they are all pretty much the same.
I looked at some of the high street money transfer services like Western Union, Moneygram, and a few others but their rates were even worse than the banks’ in many cases.
I almost gave up but then I discovered there are a lot of online providers which offer far better rates. These online providers are functioning almost in clandestine in terms of not being well-known globally at all, but they are fairly well known in the UK where the non-bank financial services sector is booming. Luckily for me, all the best rated providers are happy to do AED transactions and they are all regulated in a fashion that even if the firm collapses, the clients’ money is safe from harm. The safety and security issue are monumental to me, even more than the rates that I’ll get.
Today, I used my provider of choice, named Transferwise, and the rate that was offered to me is precisely 4.83 as it should be with £108 in fees which only amount to under 1% of the total transaction. If I send this abroad now, I will get 67,100 Dirham, 1,500 more than what my bank quoted me for. If you are concerned about transferring money to the UAE and paying through your nose, this perhaps can be a solution for you too.