Offshore Banking Updated:
Transferring money abroad can be an expensive business if you choose the wrong company. Hidden fees, excessive charges and poor exchange rates can take a sizeable chunk out of your transfer, but there are campaigns on the go that aim to stop this practice.
Research from World Bank has found a clear lack of transparency in the international money transfer sector, with phrases like "0% commission" and "fee-free" often hiding the true cost. In fact, banks and brokers have a tendency to charge extra fees by hiding a mark-up in the exchange rate, but the research found that only 36% of respondents were aware that the total cost of their transfer included these other components.
This shows how much of a problem this lack of transparency can be, with many consumers simply not knowing what they're paying for. "Fee-free" doesn't really mean fee-free at all, as providers still manage to sneak in extra costs by hiding them elsewhere.
For example, according to research from currency exchange specialist TransferWise, the average fee stated for sending £1,000 abroad was 2.56% – whereas in reality, customers paid 3.77% due to the inclusion of an exchange rate mark-up. It's a problem for holiday exchanges too, as World Bank calculated that consumers paid an extra £1.3bn in hidden fees on holiday money in 2013, so it's no small issue.
Small businesses are also affected, many of whom rely on international money transfer to conduct global sales and transactions. World Bank's research found that 80% of small businesses underestimated or were unaware of the overall cost of sending money abroad, and that could have a significant impact on their profitability.
To address the problem and, hopefully, encourage banks and other brokers to start improving transparency, TransferWise has started a Stop Hidden Fees campaign. They're calling on firms to illustrate the true cost of their services, with terms such as "free" and "0% commission" being forbidden in communications with foreign exchange customers.
They also want firms to publicise the percentage difference between the mid-market rate and the rate actually being offered for each transaction, and crucially, this should be communicated in a way that can be understood by the average consumer. All fees should also be publicised up front – a clear breakdown of the cost of the service should be provided for every transaction, and exchange rates should be transparent and clearly publicised.
TransferWise is calling on the Payments Systems Regulator, the Advertising Standards Authority, the Financial Conduct Authority, the Government and consumer groups to make this happen, and so far, the campaign has received a lot of support. It's hoped that it'll eventually lead to total transparency in the industry, but in the meantime, how can you make sure you're not ripped off?
Well, the key is to use international money transfer services that won't overcharge you in the first place! Consider using specialist services rather than banks or building societies, and make sure to do your research so you know exactly how much you're being charged. Get the process started by checking out our international money transfer service, and don't be short changed by excessive fees.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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