Banks And Money
Banking in Spain is now very good and is comparable to any other western European country but it can cause frustrations in your day-to-day life. The process can still be very bureaucratic and slow and a trip to the bank can take quite a long time since the queues move very slowly. Queues in the local bank can now be avoided by the use of on-line banking which is becoming more developed in Spain. When banking on-line you will find that most banks will have an English language service.
Any trip down the high street of a typical medium-sized town will indicate that there are many different banks. Some are very small and basically serve the local area. Others are regional, such as the Banco de Andalucia on the Costa del Sol, whilst others are Spanish branches of major multinational banking groups. The ultimate choice of bank is entirely down to you and your own needs but it is probably better to avoid the smallest banks since their range of services might be more limited. The first rule of thumb is to select a bank which is convenient to where you live.
Opening a bank account
It is now very easy to open a bank account as an EU citizen and your estate agent or your lawyer here will be very happy to introduce you to the local bank manager. A personal introduction is by far the easiest way to open an account. When you go to the bank you will need your passport, evidence that you own property in Spain and your NIE number (see later). You will be surprised on the Costa del Sol that a visit to most Spanish banks will result in a meeting with someone who speaks fluent English. This takes many of the worries away from the transactions you need to complete. Until you are resident your bank account will be designated as a foreigner’s account.
Within a short time you will have your bank account number, a cheque book and a debit card which you can use for shopping or cash withdrawals from a cash dispenser (ATM machine). The card is the most valuable since cheque books are virtually useless in Spain. Cheques are not trusted and are very rarely used or even accepted, even by another bank. We used only six cheques in three years from our chequebook. Spain remains a society where most payments are made by cash or by a debit card with suitable proof of identity. In the past this would have been your passport but until you have residencia in Spain and the corresponding identity card, a very useful proof of identity is a UK photo-driving licence. I would strongly recommend that any UK citizen planning to live here changes their driving licence immediately. It is an invaluable aid to proving your identity.
The other valuable service which you must use to pay all your regular bills is the direct debit. This takes the worry out of paying on time. It also avoids the possibility that if you do not pay on time you will be fined. Virtually all national and local tax liability will result in a fine if you do not pay by the appointed date and as a result tax collection is possibly less of a worry if you have arranged to pay all taxes by direct debit or standing order.
Unlike the UK where you receive one statement a month on your current account while on deposit accounts you might only receive one statement per quarter, Spanish banks seem to issue a statement every time a bill is paid and in addition they send you a monthly statement. There is a plus side to this since you know exactly where you are in terms of payments made but unfortunately it costs money to issue so many pieces of paper and it is you, the customer, who pays for this. Bank charges can appear to be quite high even when you are not using the account on a regular basis.
The other problem with your regular statements is the fact that from many banks they will be in Spanish – and why not, you now live in Spain. Initially we had to go through virtually every statement armed with a dictionary just to check what payments had actually been made. You can ask at your local bank whether or not it is possible to have a statement in English. If it is, it can be very convenient. On the other hand if you bank with the local branch of any well known UK-based bank you will almost certainly receive a statement in English on request.
Returning to the question of bank charges we did make an interesting discovery recently and it is one worth following up with your local bank. We had been accustomed to charges for direct debits, withdrawals of cash from the ATM machine and other services and we never questioned these charges. For personal reasons we deposited a sizeable sum in our current account in Spain and suddenly we received a message on the ATM machine that the withdrawal was commission free. You should ask your local bank what balance you need to maintain in order to qualify for this service since it will vary from bank to bank.
All the credit cards you have in the UK before your move here will be accepted, such is the nature of international banking today. The only warning I would give to you is that if you want to maintain your UK credit cards you should set up a direct debit for the minimum monthly payment with the issuing company in order to save yourself long term problems.
Increasingly companies are moving their call centres and their billing offices offshore to countries like India or the Philippines. This is fine for them and probably saves on overheads but such is the nature of the postal system between the point of origin of your monthly statement and its receipt in Spain that it can take three weeks to reach you and even if you pay on the day of receipt, it can take three weeks for your payment to reach the company. You will already be two weeks late in payment and if this happens repeatedly you might suddenly find that the company withdraws your card through no real fault of yours and this could result in you being listed as a bad credit risk which could cause problems in the future. I am currently in discussion with a major charge card company which has done just that after a history of 23 years during which I held their card.
It is also possible for you to have a Spanish-issued credit card should that be more convenient.
Coping with exchange rate fluctuations
Spain is now part of the Eurozone. When the Euro was first introduced it dropped quite dramatically in value but it has recovered recently. Currency fluctuations can be a nightmare on two counts. If you are at the stage of buying your dream property and your capital is in Sterling, a move of a few cents in the value of the Euro compared to the pound can make a major difference to the final price. If your ongoing income is in Sterling an increase in the value of the Euro could have a dramatic effect on your buying power. Equally if your move to Spain depends on a mortgage which is either in Euros or has to be paid in pounds converted to Euros you could find your outgoings changing dramatically.
Until the UK becomes a member of the Eurozone there is no real or permanent way in which you can get round these problems but there are things you can do to minimise them as much as possible. You will probably find that the majority of expatriate Brits would love to see the UK enter the Eurozone.
One way is to pre-buy your Euros if you are going through the process of buying property. Even this is a bit of a gamble because Sterling could rise against the Euro the day after you have bought your currency but this option does at least allow you to budget for an exact figure on the transaction which you know cannot change.
When working out your long-term finances you really need to consider the possibility that the pound could drop against the Euro and if this happens could you have problems in the longer term? You may have a retirement income in Sterling, you may intend to run a business from Spain billing your UK client companies in Sterling. If so, you need to consider whether or not your income or your business could sustain a 20% drop in revenue due simply to the exchange rate. Since we moved to Spain the value of the pound against the Euro has dropped by 12.5%. Our income is therefore 12.5% lower than it was in terms of purchasing power here.
Another potential action which helps is to transfer as much money as possible from the UK as infrequently as possible. When you transfer a large amount the exchange rate you will be offered will be far closer to the commercial rate. The commercial rate is always higher than the tourist rate by quite a few cents to the pound. If you are transferring several thousand pounds this can make a huge difference.
Remember also that if you are a UK pensioner you can arrange for your state pension to be paid directly into your Spanish bank account in Euros and you should not be charged commission on the transfer.