August 1 2014 Latest news:
Adam Aiken, Editor
Thursday, December 22, 2011
Holidaymakers will no longer be stung with charges for using their debit cards at high-street banks to buy foreign currency before they travel.
Even though debit cards are linked directly to current accounts, many banks have imposed charges on customers for using their debit cards to buy foreign cash.
Now, however, Lloyds TSB, Barclays, Royal Bank of Scotland (including Natwest), Santander and the Co-operative Bank have agreed to remove the charges, which are typically between 1.5pc and 2pc of the purchase. Nationwide, HSBC and Halifax Bank of Scotland do not impose the charges.
Meanwhile, the banks have agreed to give “clearer, more accessible” information about charges for using cards abroad, while many foreign exchanges have agreed to review marketing practices – particularly their use of “0pc commission” claims.
The moves come after Consumer Focus lodged a super-complaint with the Office of Fair Trading (OFT), asking it to investigate allegations of complex charging and poor information for travellers.
The OFT found that in 2010, people spent £32bn abroad, using debit and credit cards and foreign currency bought in the UK, resulting in estimated revenue of £1.1bn for travel money providers active in the UK.
About 40pc of foreign currency purchases in the UK are made using cards rather than cash, and nearly 80pc of those who took part in the OFT survey had bought at least some foreign currency before they set off.
“Companies should be earning profits by competing to provide the best-value products and services, not through charges that are hard for customers to identify or interpret,” said OFT chief executive John Fingleton.
“We are very pleased that the travel money industry has agreed to make these significant voluntary changes.
“We believe they will reduce confusion about the charges that apply when buying travel money in the UK or using cards overseas, and hope they will allow holidaymakers to be far better informed when making choices about how they spend abroad.
“This should drive greater competition in the UK travel money market.”
Mike O’Connor, chief executive of Consumer Focus, said: “Consumers should be able to buy foreign currency without being misled, confused or short-changed.
“The OFT has agreed with Consumer Focus that people are losing out due to the action of banks and others buying and selling holiday money. The fees charged are opaque and difficult for consumers to calculate.
“The OFT has addressed the major issues we raised in this market, which is good news for consumers. By giving customers clearer and more consistent information, people will find it easier to establish what they have been charged.
“It is particularly welcome that the OFT has worked with the big banks to stop withdrawal fees being charged when people buy currency on their card in the UK. It is only right that this unfair cost, which effectively charges customers for the privilege of taking money out of their own account, is stopped.”
The developments were announced by trade bodies the UK Cards Association and the British Bankers’ Association.
Melanie Johnson, chairman of the UK Cards Association, said: “The industry wants its customers to be in control of their finances and to have the information they need to do this.
“We welcome the opportunity to work closely with the OFT to deliver refinements in a number of key areas that will really help customers make better choices about how they make purchases overseas.”