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Category: Travel Date: 9/21/2011
A combination of complex charges and poor or misleading information means consumers are paying too much when buying foreign money or using cards overseas, a watchdog has suggested.
Estimating that charges to customers for exchanging money are around £1 billion per year, Consumer Focus said it is unclear how much of these charges are warranted and how much are excessive.
Following a review of the market the watchdog said consumers appeared to be losing out in three key areas, and has submitted a super-complaint to the Office of Fair Trading (OFT) to investigate the issues.
Firstly, the research found that the charges for using debit or credit cards overseas are unnecessarily complex and confusing for consumers, and as a consequence make it difficult for people to establish the full costs and shop around for better deals.
Secondly, it suggested that the charges levied on customers' cash withdrawals when buying travel money with a card in the UK do not reflect actual costs.
The watchdog said a debit card payment costs on average 9p to process and a credit card payment just 37p, yet charges for buying currency with a card are typically 1.5-2% of the amount converted.
Thirdly, it said the use of marketing phrases such as '0% commission' and 'competitive exchange rates' is misleading and makes it difficult for consumers to make informed choices and compare banks with bureaux de change or the Post Office.
"In practice, the exchange rates already include mark-ups levied by suppliers and so are not fee-free as '0% commission' implies," it added.
Mike O'Connor, chief executive at Consumer Focus, said converting £500 into euros can cost from under £10 to over £30 depending on where the money is switched.
"This is a huge difference for essentially providing the same service and typically banks offer the worst deals," he added.
"If holiday makers buy their currency from the Post Office, travel agent or bureaux de change many are stung with cash withdrawal charges by their bank, effectively for the privilege of taking money out of their own accounts.
"Individuals buy holiday money infrequently and so may not shop around much or may just stick with the same supplier. A cocktail of confusing charges and poor transparency means collectively we are losing out in a big way."
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