June 19 2013 Latest news:
Ed Foss, Senior writer
Wednesday, September 21, 2011
People are being forced to spend too much when they buy their holiday money, prompting a ‘super-complaint’ by watchdog Consumer Focus.
A combination of complicated charges and poor or misleading information means consumers are paying too much when buying foreign money or using cards overseas.
The complaint has been formally sent to the Office of Fair Trading (OFT) in a bid to clarify how charges are levied.
The watchdog believes charges to customers for exchanging money are around £1bn per year.
They say it is unclear how much of these charges are warranted and how much are excessive, but add that consumers appear to be losing out in three key areas which it is calling on the OFT to investigate.
They say that charges for using debit or credit cards overseas are unnecessarily complex and confusing for consumers. They vary significantly and make it difficult for people to establish the full costs and shop around for better deals.
Banks and credit card providers charge customers cash withdrawal fees when buying travel money with a card in the UK. These charges do not reflect actual costs - 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 between 1.5pc and 2pc of the amount converted, up to a ceiling of £4.50.
The use of marketing phrases such as ‘0pc commission’ and ‘competitive exchange rates’ by suppliers 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 ‘0pc commission’ implies.
Mike O’Connor, chief executive at Consumer Focus, said: “Almost half of us travel abroad every year and we face a confusing array of often hidden charges every time we buy currency.
“Converting £500 into euros can cost from under £10 to over £30 depending on where you switch your money.
“This is a huge difference for essentially providing the same service and typically banks offer the worst deals.
“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.
“We are calling on the OFT to investigate and work with the industry to send these dubious and complex charges packing.”
The watchdog estimates that British travellers altogether take around £10bn just in cash when they go overseas.