Exchange Rates & Getting a British Bank Account
Note: All information given in this journal is from my personal experience and research. Please be sure to seek proper legal advice for your unique situation(s). I give recommendations, referrals, and links to information based on my experiences to hopefully help your plans (and some are affiliate links from products/services I have vetted and used that I may receive compensation from), but there is no way for me to guarantee the same outcome. The reader is responsible for vetting any information, recommendations, and referrals in this journal themselves.
Don’t worry, I’ll get back to taxes soon-ish (😉), but one of the biggest issues for American citizens moving to the UK is getting a British bank account. Especially if like us, your work isn’t based in the UK. Here in the UK, most transactions are paid for via direct credit / bank transfer — similar to ACH bank transfers in the US. For direct credits, you need a UK bank account, which is next to impossible to get when you first move here. Thankfully I found an easy, low cost solution!!
If you’re interested in the inner workings of UK transfers, check out these three types, otherwise just skip ahead 😂
FPSL / Faster Payments aka Faster Payments Scheme Ltd. This is the most common version that most payments go through. Recipients usually receive payments instantly or within two hours. No charge to either party.
Bacs aka Bankers’ Automated Clearing Services. This is an older version of Faster Payments, that is automatically used if the payee or recipients’ bank doesn’t utilize Faster Payments. It can take up to three days for payments to be posted. No charge to either party.
CHAPS aka Clearing House Automated Payment. Typically used for payments over £100,000 to infinity, and there is a charge to the payee for using.
Fun fact: to my knowledge, no one in the UK refers to direct credits by their abbreviations. Using abbreviations and acronyms for everything is a predominately US thing! Most people and businesses refer to these payments as “direct credit” or “bank transfer.”
I’m often asked how we were able to move to the UK if we have businesses in the US. Prior to the pandemic, both of us had a number of clients via Zoom. During the pandemic, all of our clients moved onto Zoom, and the vast majority preferred to keep it that way after things opened up. Our work days are definitely interesting now, with the time difference, we play during the day and work at night!
This means that our income is US based, and the majority of our expenses are UK based!
As a Brit, I already had a UK bank account, but that wouldn’t solve the issue of getting our US money to the UK.
Did you know? Banks get to set their own exchange rates for consumers 😬 This means they make money with every transfer. So if your bank tells you they have no conversion fees, it’s not really true, because they make so much money off you by setting the exchange rate for us as lower and keeping the difference for themselves. For example, when we were moving, our US bank told us their rate was $1 to £.71, but at that time, the true mid-market rate was $1 to £.80 (changes daily and throughout the day). This means, for every $1 they transfer they’d make $.09. That may not seem a lot, but add that up over say $1,000 and they’ve basically stolen $90 from you!
If we paid for each transaction from our US bank and credit cards, we’d be paying a currency conversion fee and losing money with our US bank’s USD to GBP exchange rate. Not only that, but direct credits to UK businesses would turn into expensive international wire payments. So how did we get around this?
Second fun fact: as expected USD stands for United States Dollar, but guess what — GBP doesn’t stand for Great British Pound! No, GBP stands for British Pound Sterling. Us Brits and our non-sensical abbreviations 😂
The solution:
TAH DAH!
The solution I found for my international money transfers and setting up a British bank account as a US citizen:
After extensive Google researching, I came across Wise.
Wise was founded by two friends, Kristo Käärmann and Taavet Hinrikus, in January 2011 when they realized banks were ripping everyone off. From small beginnings, Wise now moves more than £9 billion a month for customers!
Remember the $90 I mentioned the bank would take from us for converting $1,000? Well right now, the typical service charge for Wise is usually around $5 for the same amount AND they use the mid-market rate. So depending on the current exchange rate, you could save approx $85.
And that’s how we get our US income converted into UK funds so we can live in the UK.
WHAT ABOUT A BANK ACCOUNT?
As a US citizen you can set up a British bank account through Wise, in fact, you can open up bank accounts in I think something like 17 different countries. So if you plan to travel into Europe, you can easily convert your funds into Euros too.
And as an added bonus, you can get a debit card from Wise that works in the UK.
Plus, if you use my link to open up a Wise account, you’ll get a fee-free transfer up to $600:
I’ll be doing another post on tips for using Wise, but in the meantime, feel free to ask me questions in the comments below and enjoy these cute pics of my furbaby Hurley.
Featured Photo Credit
Hope Rosemary @littlebike.bigcity — I loved my photoshoots with Hope all around LA. Hoping we can get together in the UK sometime in the future!
