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Remittance charges cost UAE expats dearly?

Experts calculate how much it really costs to send money home

Image Credit: Corbis/ArabianEye.com
Expats lose out on remittances if they don't choose their provider wisely and keep track of exchange rates.

Dubai: UAE expatriates who frequently make international fund transfers, either for meeting financial commitments back home or investment purposes, can rack up thousands of dirhams in charges a year, according to some financial experts.

In the remittance industry, service providers make money through transfer charges, exchange rate margins and in some cases, “back-end” fees . And if all the costs tacked into the bill are added up, the aggregate amount could reach several thousands of dirhams a year.

Standard service fees alone can vary, depending on where the money is being forwarded to. Funds moved to Asian countries, for example, can range between Dh16 and Dh22 per transaction. The charges can reach as much as Dh70 for other expats making multi-currency transfers to the United Kingdom, Europe or United States, according to currency specialists.

Other remitters tend to pay higher fees, however. At one bank dealing with high-income customers, for instance, international money transfer fees range between Dh40 and Dh100, depending on the type of transaction and bank account.

Guardian Wealth Management (GWM), a global financial planning firm, has recently calculated how much it costs UAE expatriates, particularly those in the above-average income bracket, to move funds overseas, and the accumulated fees can reach as much as Dh6,000 on average in one year.

The figure is based on the Dh10,000 average monthly remittance of western expats with household income of Dh50,000 per month or Dh600,000 annually. According to GWM, banks in the UAE alone charge up to 5 per cent in fees on money transfers. “It’s the commission taken by the banks in what is a very unregulated market,” a spokesperson told Gulf News.

Mike Coady, chief commercial officer of GWM, said that many residents in the UAE transfer large sums of money to pay for mortgages or boost their offshore savings, but “they don’t always realise they are losing sizeable amounts of their hard-earned cash each time.”

He said that remitters are not only paying up to 5 per cent in transaction fees, they are also “not receiving the optimum exchange rates.”

Foreign exchange specialists in the UAE, however, refuted the claim, citing that both money transfer operators and banks operate under a regulated environment. They said that the remittance business in the UAE is highly competitive and the service charges are among the lowest in the world, with some expatriates enjoying “zero per cent fees.”

“This is not true. In UAE, banks and exchange houses charge a set fee for remittances. For home remittances to India, Philippines, Sri Lanka, Bangladesh and Nepal, the charges are ranging from Dh16 to Dh22 per transaction, depending on the amount,” said Rajiv Raipancholia of the UAE Foreign Exchange and Remittance Group (Ferg).

He acknowledged, though, that multi-currency transfers to other countries, including US, Europe, Canada, Australia, Switzerland and UK, can cost between Dh45 and Dh70 per transaction, and senders may have to deal with certain add-ons, such as “back-end charges” that are estimated to be around Dh25 to Dh60, depending on the bank and the receiving country.

Since remittance costs can vary depending on how or where the funds are being forwarded to, it is important for expats to choose their service provider wisely.

“Choosing the right partner to remit money back home is very important, given that there can be a difference in fees depending on the channel or service chosen,” Sudhesh Giriyan, COO of Xpress Money, told Gulf News.

“[But] the money transfer industry in the UAE and the GCC at large is highly regulated with minimum scope of violating laws or over charging customers. Owing to the millions of expats that live in the UAE and the huge volumes of money that they transfer to their home countries, the money transfer industry here is very competitive and affordable for the end customer.”

Here are a few tips to ensure you get the most out of your hard-earned dirhams, the next time you send money home:

  • Send money in bulk. The fees collected by currency specialists are often on a per transaction basis.
  • Keep track of the latest exchange rates. Currencies fluctuate all the time and in many cases, you get poor exchange rates when you send during off days in the UAE or the receiving country.
  • Compare exchange rates and service fees at different service providers.
  • Watch out for hidden charges. When you send money to certain countries, a “back-end” fee may be collected on top of the standard service fee.
  • Choose a regular fund transfer service. The so-called “express” service, which speeds up the remittance, can cost a few dirhams more.
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