Many expats moved to Spain and the Canary Islands at a time when borrowing money from Spanish banks was a relatively simple and straightforward affair. Obtaining a mortgage in Spain, often through the developers of new build properties, and usually at a very good rate of interest, was something that many expats took advantage of. In addition, credit cards, often with very high credit limits, suddenly became freely available in Spain. Unlike the UK, the credit card phenomenon was a relatively new innovation in Spain, but was an opportunity grasped with enthusiasm by both Spanish and expats alike.
As we all know, it is now payback time. Funds are no longer as freely available as they once were and Spanish banks continue to tighten their rules, often without notifying their customers. One of the consequences of this new fiscal tightening has been the impact upon credit cards issued by banks. Previously, as in the UK, credit cards in Spain were issued on the basis of a credit check, as well as checking the customer’s account history. However, from a number of emails that I have received recently, it appears that a new dimension has been added to guarantee that the debt will eventually be repaid to the bank.
It appears that many Spanish banks now link credit cards issued to any deposits that are made with the bank by their customers. For those who are fortunate enough to have savings this will have little effect, until they attempt to withdraw their savings. It seems that such customers will have their request for withdrawal of funds blocked until they have repaid their credit cards and other loans made by the bank in full. Only then will the deposit be released. From the bank’s point of view, this may seem a sensible move. However, for those customers who urgently have need of funds saved for emergencies, such as health issues, this can cause considerable delays, inconvenience and added stress.
I recently heard from one couple that had to return to the UK urgently because of illness. They had a mortgage and a credit card with their Spanish bank and their payments were fully up to date; indeed, they had been responsible and model customers of the bank for many years. Unfortunately, they also maintained all of their savings, which were not insignificant, with the same bank. However, when they attempted to withdraw some of their funds, their request was rejected. After visiting the bank and discussing their problem, they were told that their deposits were held as security and that they would have to repay all of their mortgage loan and their credit card before their savings could be released. When I met the couple concerned, they were distraught and appeared to be ‘trapped’ in a situation whereby they could not afford to return to the UK, as they no longer had readily available funds.
This is not the first time that I have heard similar stories, although this was the one with the most serious implications for the couple concerned. Most expats that I have spoken to are unaware of the current linkage between bank deposits and credit cards, and I suspect that this is a change in the ‘terms and conditions’ that have been applied during the banking crisis. All banks operate slightly differently and it may be wise to check the current situation with your own bank.
The moral of this story is clear. If you are fortunate enough to have funds deposited with a Spanish bank, make sure it is not with the same bank where you have a mortgage, credit card or a personal loan. Experts also suggest that it is wise to maintain a percentage of your funds in the UK – just in case. As the old adage says, ‘Don’t put all your eggs in one Spanish basket’.