5 things you must know about SWIFT and SEPA payments

People are looking for inexpensive channels to make money transfers and expect the bank to act in faith to aid them. However, customers are often dumbfounded when charged with high fees because they did not make the right kind of payment with the correct payment reference. SEPA and SWIFT payments are the most commonly done by banks and financial institutions. They are glaringly different, yet people do not know the difference, or even if they do, they do not know its requirements in real-time. Therefore, this article is analyzing some crucial factors of SWIFT and SEPA payments.

Here are 5 things you must know about SWIFT and SEPA payments:

  What is SEPA and SWIFT Payment?
  What is the difference between SEPA and SWIFT Payment?
  How much do SWIFT and SEPA cost?
  Are you being overcharged for the transfer?
  What can you do to avoid being overcharged?

1. What is SEPA Transfer and SWIFT Payment?

The most commonly known standards for payment reference in financial transactions are SEPA and SWIFT. SEPA stands for Single Euro Payments Area, a European initiative under the Single Market to enable cross-border cashless payments in the EU under the single Euro currency. They are usually made free of charge. SWIFT, on the other hand, stands for Society for Worldwide Interbank Financial Telecommunication. It is a corporation that provides a secure network to banks to enable the safe transfer of money internationally. It assigns a unique ID to payments to identify its institutional sender (the bank), location, and branch.

2. What is the difference between SEPA and SWIFT payments?

SEPA's member countries are all the States in the EU and EEA with the United Kingdom after Brexit. A SEPA transfer includes four distinct schemes to execute the payment through a specific instrument. These include:

  • SEPA Credit Transfer - payee, receives the money within 3-5 hours upon payment;
  • SEPA Instant Credit Transfer - an amount less than 15,000 EUR reaches the receiver within 10 seconds;
  • SEPA Direct Debit for consumers - offers direct-debits to banks
  • SEPA Direct Debit for B2B.

A SEPA bank transfer requires an IBAN number. It ensures inexpensive and fast transactions within the Eurozone and convenient E-banking.

A SWIFT transfer can be made between different currencies. Almost every country's banks and financial institutions in the world use SWIFT. It makes up for most international transactions. A SWIFT payment requires the receiver's details, like bank account number, address of the bank and the SWIFT code. The beneficiary receives the money within 3 working days. It incurs a charge, mostly for currency conversion, which either party can pay and is more expensive than SEPA transfers.

3. How much do SWIFT and SEPA cost?

SEPA transfers cost nothing, and whatever costs there are, banks take it out as part of their service charges at the end of the month. The fee does not exceed 50 cents per month. SWIFT, on the contrary, can cost the payer around 3 to 4% of the amount, and it includes currency conversion and other administrative costs. In real money, it can be up to 30 EUR per transfer, and the charges differ from banks to banks and depend on the currency. In some cases, both the sender bank and the receiver bank may charge the party. Both senders and receivers, therefore, need to understand what fees they might incur.

4. Are you being overcharged for the transfer?

Banks often charge customers for SEPA transfer by mistakenly sending it under SWIFT payment. This may happen due to several reasons:

  • The sender does not understand the difference between SEPA and SWIFT transfer; thus did not realize when they were setting up the payment and chose the wrong transaction category;
  • The online banking system was too outdated or confusing for the sender to understand whether they were making a SEPA or a SWIFT payment;
  • Although rare, the banks have tricked the sender into using SWIFT transfer to earn commissions.

The consequences of a mistaken money transfer are not only costly but also a headache. Apart from the expensive fees, customers also face delays. The SEPA receiver bank may not accept the SWIFT payment and may reject the transaction overall. This leads to the uncertainty of refunds which may take months to receive.

5. What can you do to avoid being overcharged?

Customers only need to observe minor details when making a transfer. When setting up an online payment, notice the information your bank is asking for. If the bank is making a SWIFT payment, they will ask for the following details, which are not required for SEPA transfer:

  • The receiving bank's address, including branch;
  • The beneficiary's address;
  • The SWIFT code;
  • Payment details include SHA (shared) or OUR (sender covers all transfer charges).
  • Currency specification and
  • A large fee

A SEPA payment is strictly made in Euros. It does not require an account number, branch codes, beneficiary's address, or the receiving bank's address. If you notice these details, you are likely making a SWIFT payment.

Sadly, some banks trick their customers into paying SWIFT fees for SEPA payments. Fortunately, the EU parliament voted for European banks to eradicate SWIFT payments within European borders. After 2019, European banks are forbidden to charge you for SWIFT payments within the EU.

The Parliament vote does not eradicate the problem entirely as banks still resort to these underhanded measures for commission. Suppose you suspect your bank is unlawfully charging you for a SWIFT payment you did not intend to make. In that case, we urge that you notify the relevant authorities.

Last update: 08/03/2021