Making payments to other EU countries

R. Zammit writes: I have a euro account here in Malta and presently it costs me Lm3.50 in charges to transfer the equivalent of Lm1 in euros. Can bank charges be so high for EU transfers?

A similar question was also put by P.L.L. Gussenhoven of Victoria who asked whether EU law on cross border payments is being implemented in Malta.
You should not incur higher bank charges for a payment to a bank account in another EU country than you do in Malta. This applies with respect to transactions made in the euro currency. So comparisons should only be made with respect to transactions using the euro currency. Not our currency.

Let us say you want to make a payment in euros to a person or a company that holds an account in another EU country. You decide to make this payment using a bank transfer from Malta. Or you may want to use your credit card when travelling abroad. Or perhaps you may want to make a payment using your credit card in Malta to purchase something over the internet or via mail order.

In all these cases, the bank charges applicable to this payment cannot be different from the charges you pay for a similar transfer made to a euro account in Malta. If no charges or if minimal charges apply to an equivalent transaction in Malta then the same should apply to your payment sent to another EU country.

This means that in all these cases the charges have to be the same as those applicable to similar payments made in euros to persons holding a euro account in Malta. Charges cannot be higher just because the payment is received in another EU country rather than in Malta. In other words, the transaction must be considered by your bank as a strictly domestic transaction.

The principle also applies with respect to bank charges for receiving (as against making) a payment. If bank charges are applied for receiving a payment made to you in Malta, then the same charges should apply when an EU transfer is received in euro currency, that is, received in your euro account. If no charges are applied for a domestic transaction, then no charges should similarly apply for the EU transfer.

In principle, the person making the payment is responsible for the bank charges with regard to the transfer to be effected whereas the person receiving the payment is responsible for any charges, if any, for receiving the payment at the receiving end.

Remember, however, that since in Malta we do not use the euro currency yet the comparison cannot be made with transfers using Maltese currency but with payments using the euro currency between accounts held in Malta.

There are some conditions that must be satisfied for this rule of equal treatment of euro transactions within the EU to apply.

For instance, you need to quote banking details, such as the IBAN (international bank account number) of the account to which you are making the payment as well as the Bic number (also commonly referred to as the Swift number) of the bank where the account receiving your payment is held.

Usually, the person or company to whom you are making the transfer would provide you with their IBAN and Bic numbers directly. If they do not, you should ask for them to make sure you do not lose your entitlement for the savings on the bank charges. There are internet sites that provide details of Bic numbers.

Obtaining specific IBAN and Bic numbers may sound cumbersome. But you can get your own IBAN number from your bank. And besides it has to do with enabling an automated money transfer - which is what arguably makes the transaction cheaper - rather than having the transaction processed manually.

The rule applies for transfers of up to €12,500, an amount that will go up to a maximum of €50,000 from next January.

The bank charges should be equivalent to domestic transactions even in the case of payments made by cards. And, in due course, when the euro becomes our currency, the same will also apply to cash withdrawals that we make from ATM machines using our credit or debit cards. Here too, bank charges for euro transactions will have to be the same for euro transactions made in other EU countries as for euro transactions made in Malta.

So in conclusion, if you feel that the bank charges you are being asked to pay are too high you should first check whether the bank charges for an equivalent payment to a euro account in Malta are different. If they are, then you can complain with the bank and demand to pay equivalent charges for your EU transfer. If they are the same, then the bank is in line with the requirements of EU law.

This EU law already applies in Malta. As such, however, since domestic transactions in euros are still limited in scope (although they are possible) the real effect of this law will only be felt when the euro becomes our official currency.

Readers who would like to raise issues or ask a question to Dr Busuttil are invited to send an e-mail, making reference to this column, to contact@simonbusuttil.com