Like many other industries, technology has transformed banking tremendously over the past few years. Back in the old days, there were no ATMs, no way to pay bills through your phone or to transfer funds across to someone else using your computer. While a lot has changed over the years, there is one thing that is still a pain in the ass- the fees that banks charge. And I honestly don’t know why that is the case in the day and age we live in.
To show you how much banks charge, I conducted a small experiment. During my last trip to New York, I opened an account with Chase. It’s good to have a US based bank account- generally a requirement if you are using services such as iTunes or Hulu. My experiment involved sending $100 to that US bank account and I did that using two services- my local bank (EmiratesNBD) and my PayPal account. Keep in mind that the official US$ to AED rate according to xe.com is 3.67 (rounded.)
Through EmiratesNBD online banking, I transferred US$ 100 to my Chase account in the US on the 30th of Jan which was credited to my account on the 31st of Jan- quite a speedy transfer. The following is a list of charges I incurred with transaction:
Emirates NBD TT Charge: AED 50
Transfer Amount: AED 368.50
DEUTSCHE BANK TRUST CO Charges: $10/AED 36.85
Chase INCOMING WIRE FEE: US$15
So in the end, I paid AED 455.35 to end up with US$85 in my US bank account. If you do the math, I was charged an exchange rate of AED 5.35 for $1 based on a $100 transfer. I would have loved to get that kind of exchange rate if I walked into a money exchange and passed them a $100 bill.
Next, I tried PayPal that lets you add a US bank account to which you can withdraw funds from your PayPal account. Now since I cannot add funds to my UAE based PayPal account, I had a friend send me US$100 to my account using his EmiratesNBD account. That amount equated to AED 380.94. PayPal charged me a fee of $3.70 so what I ended up with in my account was US$96.30. The transfer fee to the US Bank Account was ZERO so I got that entire amount into my US account.
The conversion rate turned out to be AED 3.96 but keep in mind that PayPal charges 2.9% plus $0.30 per transaction so if I was to send $1000 instead of $100, I would have been charged $29.30 which is still lower than the $38.60 that I got charged using my bank. But double that transaction amount and PayPal starts looking expensive. In all fairness, I’m not sure if my bank would charge me more for a larger amount. Also, It did take me a bit longer to get the funds into my account- the payment showed up as “pending” in my account after two days and it took another two for it to actually be available for use.
So if you are looking to transfer smaller amounts of money, PayPal certainly seems to be the way forward. Even local bank transfers are charged at AED 25 or so anything under AED 500 would make sense to use PayPal instead.