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Australians are paying too much for Foreign Currency Services

Published on September 12, 2019 11:08 pm, by

It’s a familiar story – if you bank with one of the big 4 banks you are probably paying too much. Our analysis of transaction accounts, savings accounts, credit cards and mortgages proves this over and over again.

It also applies to International Money Transfers. Last week the Australian Competition and Consumer Commission (ACCC) released the results of it’s inquiry into Foreign Currency Conversion Services. The inquiry focused on International Money Transfers, foreign cash services, credit and debit card foreign currency conversion services and pre-paid travel card services for consumers and small to medium sized enterprises.

Foreign currency conversion services are important – each year Australian consumers purchase more than $40 billion dollars in foreign currency.

The key findings weren’t that surprising:

  1. Prices are difficult to compare – they are complex, they are presented in different ways by different suppliers and they lack transparency
  2. Customer inertia is limiting the growth of smaller providers and new entrants
  3. Loyalty to the big four banks is costing consumers – big time! For example, consumers that used the big four banks to send International Money Transfers in US dollars and GB pounds during 2017-18 would have saved about $150 million if they’d used the lowest priced provider instead and customers of the big four banks sending an International Money Transfer in GB pounds to the UK in February 2019 paid a price that was about 20 per cent higher than the cheapest providers price
  4. Credit and debit cards are generally cheaper than foreign cash, travel cards and International Money Transfers, though there was some evidence of cardholders being charged unexpected foreign currency transaction fees and of course the cost of foreign cash was substantially higher at the airport!

Recommendations

The ACCC made the following recommendations for consumers:

For all foreign currency services

  1. Compare the total price – the fees and the exchange rate. If you use a comparison site be aware that they may not be independent (ie they may be selling their own foreign currency services) and they may not cover all available services
  2. Shop around – especially if you use one of the big four banks. They are rarely the cheapest option
  3. Where you purchase foreign currency matters – try to make your purchases online and avoid the airport!

When sending money overseas

  1. Shop around – there are significant price differences for International Money Transfers. Here is a list of services that might be cheaper than the one you currently use
  2. Banks are not the only secure option available
  3. Check the fees – especially any that might be deducted from the money you transfer

When travelling overseas

  1. Debit and credit cards are usually the cheapest option for making purchases while overseas – especially if you use a card that doesn’t charge international transaction fees. Here is a list of cards that might be cheaper than your current card for making overseas transactions.
  2. Travel cards often have fees for purchasing the card, ATM fees and inactivity or closure fees, all of which can make them an expensive option. They can be especially expensive if you use them for transactions in a currency that you don’t have loaded onto the card
  3. Avoid purchasing foreign currency at the airport!

When shopping online

  1. If you make frequent overseas purchases you should consider getting a credit card with no foreign currency transaction fees
  2. Keep an eye our for unexpected international transaction fees from businesses that look like they are located in Australia. This could be considered misleading and you may be entitled to a refund. You should contact whoever issued your card (eg you bank) or the ACCC.

You can read the full ACCC Report here.

Here is a list of cards that might be cheaper than your current card for overseas transactions

Product nameCard networkPurchase interest rateInterest free daysCash advance rateCash advance fee (%)Cash advance fee ($)Normal annual feeFirst year annual feeComplimentary travel insuranceWebsite link
BankWest Breeze PlatinumMastercard9.90%5521.99%2.00%$4.00$0.00$0.00YesLink
HSBC Low Rate Credit CardVisa12.99%5525.99%3.00%$4.00$99.00$99.00Yes (Domestic)Link
BankWest Zero PlatinumMastercard17.99%5521.99%2.00%$4.00$0.00$0.00YesLink
Coles Rewards MastercardMastercard19.99%5519.99%3.00%$1.95$99.00$99.00NoLink
28 Degrees Platinum MastercardMastercard21.99%5521.99%3.00%$4.00$0.00$0.00NoLink

Here is a list of transfer services that might be cheaper than the transfer service you currently use. The costs were calculated using a transfer of $1,000 AUD to USD

Company nameMinimum amountOnline transfer feeTransfer speed
OFX$250$151 - 2 days
Remitly$10$3.993 - 5 days
TransferWise$1$6.56
Word Remit$1$3.99within an hour

 

 

This summary has been prepared by MoneyBrilliant Pty Ltd (AFSL 492711). The information in this summary is of a factual nature only. We are not suggesting or recommending that you take any particular course of action in relation to any financial product or service. It does not take into account your personal circumstances or objectives. If you need financial advice or taxation advice you should seek advice from a licensed financial adviser or tax agent.

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Peter is the CEO of MoneyBrilliant. He has over 20 years experience in banking, insurance and accounting. Peter has three sons, ranging in age from 16 to 3, is a sport and fitness fanatic and a volunteer firefighter. He is passionate about improving people's lives through making financial services more accessible.

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