Safe passage for your money

Banks or currency exchangers? When transferring your hard-earned funds, both have their advantages and pitfalls.

Customers queue at an exchange bureau at Al Wahda mall. These institutions often provide better transfer rates than banks.

We are not happy when as consumers we have limited choices; but having too many options can be no less burdensome. Sending money abroad from the UAE is one of those areas in which having too many choices has actually left many tired of trying to figure out the best options. The remittance market is so competitive and offers so many alternatives that the canny consumer can score exceptional rates, and those who value time over money can easily find convenient ways to send money abroad. To transfer funds you can choose between banks or currency exchangers, or sarrafi, which offer wire services, and their shops dot every city in this country. Both offer several ways to send money, from the simple transfer to a recipient's bank account that clears in a few days to immediate wire service, which makes funds available to a recipient within minutes. The competition has led several banks and sarrafi to tailor specific programmes that cater to different needs. In general, the difference between banks and sarrafi comes down to convenience versus price. Most banks allow you to make the transfer automatic or do it with just a few clicks from your web browser, while using a money exchange requires a trip downtown or to a mall for the service. A sarrafi is often financially advantageous because of better exchange rates and, in some cases, lower fees than banks. But the cheaper option can also mean coping with the UAE's ever worsening traffic and parking situation. The easiest and most common way to send money through either banks or sarrafi is by depositing the funds in a recipient's bank account, which is a good option if the recipient can wait a few days for the funds. You can send funds to the account through the dozens of sarrafi businesses in the area, such as UAEXchange, Al Fardan, Al Ansari or Arabian Exchange. Conversely, you can use your bank. Many banks, especially those that seek to attract expatriates, offer attractive exchange rates, and their fees for transfer to a bank account are comparable to those of sarrafi. National Bank of Abu Dhabi account holders, for instance, pay Dh15 per transfer within the Emirates; Dh20 to GCC countries; Dh25 to the Indian subcontinent, Dh30 to European countries, Dh45 to the US and most other countries, except to Australia, Myanmar, Korea, Seychelles and Singapore, which cost Dh50 per transaction. The exchange rate was recently about Dh3.69 to the US dollar. HSBC Status customers can transfer once a month without a fee - they already pay Dh100 monthly fee for account maintenance - and for conversion they pay Dh3.693 per US dollar. You can also make this transfer automatic by having your bank process a transaction on a predetermined basis. More than one charge per month, however, costs you Dh70. Even though HSBC bills itself the "world's local bank", unless you are one if its premier account holders, transferring from a local HSBC account to an HSBC account in another country is considered a country-to-country transaction and is subject to higher fees. Many consumers choose sarrafi over banks because of lower fees, and also because transferring money is the main business of sarraffi. Hussein Jamali, who owns tailoring business, prefers sarrafi to banks for receiving payments from his customers and for sending money abroad. "Banks are more expensive, I get it cheaper and faster from these stores," Mr Jamali said as he stood in Abu Dhabi's 10 Street, off Hamdan Street, where sarrafi stores line the road from one end to the other. The sarrafi charge between Dh45 to Dh60 for transfers to the US, Europe and Australia, and Dh15 to Bangladesh, India, Pakistan and Philippines. Sarrafi sell the dollar at Dh3.68, which can be reduced to Dh3.675 for large amounts. Bank rates are often between Dh3.69 to Dh3.70 per dollar. Although for small transfer amounts the rate variation may not make much of a difference, especially when you take into consideration the time spent on travelling downtown, the taxi fare and the hassle of looking for parking, for a large amount, sending through a sarrafi can mean significant savings over time. Suppose you wanted to send $8,000 to the US; it would cost you Dh29,544 at HSBC, converting to the dollar at a rate of Dh3.693, plus the Dh70 fee. A sarrafi would exchange to the dollar at 3.675, making your total Dh29,400 plus a fee ranging from Dh46 to Dh60. If you want to send money urgently, for a hefty fee you can wire money through Western Union or MoneyGram from a sarrafi. UAEXchange, one of the larger money exchangers in the country, allows consumers to bypass Western Union and MoneyGram and send funds instantly to Australia, India and the UK through its Xpress Money programme at half the rate that the two wire services charge. The company has about 200 branches in India, nearly a dozen in the UK and additional branches in Australia. The recipient can cash the wired money at a branch in one of those countries. As in transfers through Western Union and MoneyGram, the fees for Xpress Money increase with the amount being transferred. So what is your best option, money exchangers or banks? The answer depends on how much you send each time and how much you value convenience. Are you sending US$2,000 on a regular basis, or as little as a few hundred dollars a month? Or are you sending larger amounts? For small amounts, banks are likely to be the best option, given that you can cut the burden of making a trip every time you send money abroad. Another factor to consider is the fees that the recipient's bank charges for an overseas deposit. In the US, for instance, receiving banks charge between $10 to $20 each for each transfer. After sending money to the US for almost a year through my bank, I've learnt that the smartest financial decision is not to send money regularly, but to send it less often in larger amounts. That way, I would not have to deal with the hassle of going downtown every month. More importantly, with bigger amounts, I will get a better exchange rate and reduce the number of times I pay a transfer fee here and in the US. [e-mail]