Money down the drain: Aussies overpaying millions in foreign currency fees

Jetting off on an overseas holiday is the dream for most people, but a new report has revealed that hardworking Aussies are essentially sending their money down the drain on their travels as they’re paying too much for foreign currency conversion (FX) services due to confusing pricing and a lack of robust competition.

The report compiled by the Australian Competition and Consumer Commission delved into travel cards, foreign cash, credit and debit card options available to use overseas and found that Aussies could save millions of dollars by simply shopping around and forgoing loyalty to a particular bank.

However, that is apparently easier said than done with the report revealing the challenges faced by consumers and difficulty making informed decisions about FX Services. This in turn leads to the big four banks gaining the majority of customers for their travel currency needs, despite there being cheaper alternatives on the market.

In fact the ACCC found during 2017-18, individual consumers who used the big four banks to send international money transfers (IMTs) in US dollars and British pounds could have collectively saved about $150 million if they had instead used a lower priced IMT supplier. “Shopping around could save Australian consumers hundreds of millions of dollars each year,” ACCC Chair Rod Sims explained.

“Consumers and small businesses tend to default to their usual bank to send money overseas, but this may not be cheapest option. This is another example where consumers may end up paying more for their loyalty.”

The speed bumps faced by Aussies are plenty with suppliers not disclosing their total price up front, leading to more unexpected fees for some services. Not only this, the complex prices can deter consumers from shopping around because of the time and effort required to do so.

Overall, it was found foreign cash is more expensive at airport locations than other locations. For example when buying USD $200 in February this year, consumers could have saved AUD $40 by purchasing from the cheapest supplier at a non-airport location, compared with the most expensive supplier at the airport.

As for what cards to use when overseas, the ACCC discovered if customers of the big four banks used a debit or credit card without international transaction fees instead of a travel money card, they could save up to AUD $13 on a USD $200 purchase. Meanwhile, these same customers could save up to AUD $5 on a USD $200 purchase if they used a ‘regular’ debit or credit card instead of a travel money card.

While comparison sites may seem like the best option to help decide what direction to take when seeking FX services, the ACCC warned this could lead to further rip-offs. Consumers were urged to be wary when it comes to these sites, explaining that some may not be independent and suppliers could pay for their services to be promoted by certain sites.

In hopes of easing the financial distress the ACCC has released a guide to help consumers explore their options. This includes tips on sending money overseas and avoiding fees when making overseas purchases online.

“The guide will help consumers to shop around, carefully select where and how they pay for their purchases and to identify fees so they can get the best deal,” ACCC Chair Rod Sims said. “For example, the guide explains how foreign exchange services with low or no fees are not always the best value for money. We have also tried to clear up a few misconceptions, such as the assumption that paying in Australian dollars when shopping overseas is always best, when that is not the case.”

Meanwhile, the ACCC has also sent a stern warning to businesses supplying FX services, explaining how to disclose prices to consumers and the action that will be taken if they don’t follow suit. “We consider businesses who ignore their best practice guidance may be at risk of breaching the Australian Consumer Law,” Sims explained. “The ACCC will take action against businesses who do not make appropriate disclosures to consumers.”

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.