Checks and Balances: Banking in Spain & Portugal

Remember the days when American Express advised us not to leave home without the company’s ubiquitous traveler’s checks, accepted and exchanged virtually everywhere … for a fee?

Alarmy Stock Photo

Forget about them.

They’re no longer accepted at banks and few offices (far between) will convert them to the local Euro currency.

It’s not only American Express checks. It’s all checks. Especially, personal ones. Even if you have a bank account in Portugal or Spain, you can’t just deposit your Christmas card gifts from back home or birthday presents sent on paper. Some banks won’t accept them at all; others, will charge a hefty fee – upwards of 25€ — for the privilege of waiting while each check is sent back to the USA for conversion before posting to your account.

EU countries are becoming cashless societies where plastic is the financial instrument de rigeur—at least at retail stores and points-of-sale. No longer are cards inserted, slid, or swiped; they’re hardly even touched, since the card “reader” comes within kissing distance of approval or denial, as your hand hovers over it. Increasingly, too, is your telephone as the tool of choice in financial transactions. Same concept, different instrument: card or mobile.

It may be awkward for some, but remind anyone from the USA in the habit of sending you checks that, not only can it take up to two months for you to receive it in the mail … and most banks (if they’ll even accept American checks) charge a minimum of 12.5% of the check’s value to convert and deposit it to your Portuguese or Spanish bank account. In the end, it’s a lose-lose proposition with you paying coming and going.

Best bet? Impersonal as they may be, international funds transfer services – Paypal, (Transfer)Wise, Western Union, etc. – will charge a small fee and choose the exchange rate, but the money will be received by you usually within 24 hours. Money can be transferred quite easily from home via the Internet.

Online, too, deposits, withdrawals, and transfers are now virtual, if not literal. Buying and paying online has boomed thanks to stay-at-home shoppers who purchase everything not available to them through local merchants or shopping centers.

Think that’s going to change once Covid no longer is such a threat?

Brace yourselves for the brave new world of banking.

Neither Spain nor Portugal typically credit your money that they’re holding (and investing) with interest. Quite the contrary: For the privilege of granting banks the right to serve as clearing houses for your recurring bills and financial transactions, several of Spain’s largest banks are charging fees of 90 Euros quarterly – that’s €360, nearly US $500 per year – to steward your funds, plus additional fees for withdrawals, transfers, and other transactions. While few banks or any in Portugal (that I know of) charge such usurious fees, they all do eat away at your savings with fees for every transaction. Adding insult to injury is that – on top of these fees – banks are also required to charge IVA (sales tax, if you will) of 21% in Spain and 23% in Portugal.

(If/when you do open an interest-bearing account, it’s almost not worth it: we deposited €11,000 in a U$D account for six months—you need to specify how long the investment period will last. At the end, we had earned about 40€ on our deposit. But that was before taxes were deducted on our earnings. In the end, our €11,000 earned a whopping 14€! Plus, the account usually isn’t insured.)

A bank account is required for residency in both countries so that your recurring bills can be directly debited.

Then there’s the Multibanco:

More than the ATMs Americans are accustomed to, Multibancos do much more than disperse cash from your account, or allow you to move money from one account to another within the same bank. You can pay bills and/or transfer money to other people, businesses, and government agencies (regardless of their bank) and debit directly those recurring charges—like your electric, water, car payment, insurance, and telecommunication bills. Forgotten your personal IBAN number? You can obtain it – along with a detailed summary of your transaction history – electronically through your home computer or mobile device and, of course, the Multibanco.

We’ve come to appreciate the Multibanco, but know that all aren’t alike. There’s a difference between an ATM and the Multibanco.

The branch we bank at, for instance, has a Multibanco outside, while, inside the entrance is its own ATM. You can’t use any other bank’s credit or debit card at that ATM … but, theoretically, you can use your bank’s debit card at any Multibanco.

When using a debit card with a Multibanco to withdraw funds from a bank account in the USA, always be certain to reject the option for the amount to be deducted in dollars. It’s the last question prompted – twice, including a confirmation – before the transaction is completed. Instead, opt for the withdrawal to be done in Euros, with your home bank handling the transfer. The same holds true when using a debit card for purchases: always choose the “euros” option, not the dollars one.

On a withdrawal (or purchase) of 100€, we’ve saved ten to fifteen euros that way … enough to buy a really good lunch in Iberia.

Supposedly, you can’t withdraw more than two hundred euros (€200) on any day from the Multibanco. We ass-u-me they’re inter-connected … so if we withdraw €200 from this Multibanco, we won’t be allowed to withdraw another 200€ from that one, using the same card and account.

If one needs cash – more than €200 – on the same day, however, there are ways around the Multibanco’s limits. If you have more than one bank account and debit or credit card, for example, just use another one to draw out up to another two hundred euros. Keep going … until you reach what you need or run out of cards.

Then, of course, you can go into the bank itself to take out larger sums. But you’ll pay a higher fee for the personalized service.

Perhaps someone else can explain all the curious charges, fees, taxes, and take-aways affixed to our bank accounts in Portugal and Spain. You know: those amounts preceded by minus signs and abbreviations?

I understand “comissões” and my monthly “quotas” – fees charged for the bank’s associated accounts with additional benefits – but what about all those other encrypted letter deductions:

  • IMP.TRF.P?
  • DESP.TRF.P?
  • I.SELO OP.BANC?
  • COM SERV EST R O?
  • COM OE STP NET 24?

For pure economics, financial institutions are making money on top of money through a variety of fees, charges, and commissions.

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning,” Henry Ford claimed.

Thomas Jefferson charged, “I believe that banking institutions are more dangerous to our liberties than standing armies.” Of course, neither man had access to the Multibanco.

Disclaimer: I share these stories of our experiences not to complain or seek sympathy, but because we are North Americans acculturating to another country’s norms and expectations. Information in posts such as this aren’t found in tourist or relocation guides … nor asked about and answered in most Facebook groups. Hopefully, some will learn from my anecdotes and be better prepared for the grit and grist, the grain of living abroad. We love Portugal for what it is, not what it isn’t, and have no intention of returning to the USA.

Bruce is publisher and creative director of Portugal Living Magazine. Read the current online issue and subscribe to the magazine at no cost whatsoever: http://portugallivingmagazine.com/our-current-issue

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