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Is this the end of excessive travel money charges?

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Profile photo of Nisha Schumann Nisha Schumann Economic Policy Team
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Planning your holiday is stressful enough without having to worry about potential charges when buying foreign currency. So, travellers should be pleased to hear the OFT has acted to make industry clean up its act.

In September, Consumer Focus launched a super complaint lamenting the excessive level of charges levied on the use of credit and debit cards when buying foreign currency in the UK.

The complaint also addressed the lack of transparency around the different types of charges that may apply when customers use their cards abroad. Today the OFT announced its response to the super complaint and it looks like the sector is in for a few changes.

What’s going to change?

Barclays, Co-op, Santander, Lloyds and RBS – all of which have previously charged debit card holders up to 2% to buy foreign currency in the UK – have agreed to stop charging.

Which? has previously demanded that customers should not be charged when using their debit card to buy currency and we continue to push the government to outlaw debit card charges altogether.

The UK Cards Association and the British Bankers Association have also announced that they are going to issue guidelines for how their members present any foreign transaction charges on statements, websites and marketing material.

The hope is that banks and card companies will be forced to make these charges clearer and more consistent for their customers.

The end of excessive foreign currency charges?

So is this a victory for the consumer? The answer is ‘maybe’. Whilst we welcome the move by the industry to improve information on charges, it should be said that people continue to face a raft of unfair charges in other areas, such as unauthorised overdraft charges or excessive surcharges when paying for goods and services online.

The success of this move also depends on the robustness of the guidelines and banks’ willingness to follow them. While it’s important that charges are made clear and displayed in a transparent way, we also think that charges in general should be fair and reflect the actual cost incurred by the banks. At present, they often don’t.

So although we’re pleased about this move, we’re not too impressed.

Do you think the proposed changes will make it easier for you to make an informed choice when paying for goods abroad or buying foreign currency?

Comments
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Phil says:
20 December 2011

That’s the banks for you, wait until nobody can afford to go abroad and then cut the charges on foreign currency.

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John Ward says:
21 December 2011

I have never quite understood how charging debit card users for buying foreign banknotes could be justified. Commission is another dark art that corrupts fair trade. The exchange rate for buying or selling should be set by a central authority and bureaux should then be able to add their handling fee [not a “commission”]. Sellers obviously have costs in stocking foreign bank notes [which they might have had to buy at higher values than they can sell them at – but it can also work the other way] and have to have sophisticated security, inventory and record-keeping procedures. While I can see that the higher the value of the notes issued the higher the operating costs will be, I do not think the handling fee should be a percentage of the total value but so much per £100 [which they could taper to reflect economies of scale]. The cost of buying currency would then be transparent and there should be a standard notation for the tariff along the lines of “£100 buys €116 / €100 costs £86, plus our handling fee” and then a separate table should show the handling fee per £100 sterling equivalent transaction [e.g. £100/£5; £200/£8; £300/£11″ and so on].
I was amazed recently when I asked our local Thgomas Cook to change USDollars to Euros. Even though they stock both currencies it seems that there is no public exchange rate so I had to interchange them via sterling and pay a whack on both sides of the deal. We are a nation of international travellers and tourists and live in the electronic age. You no longer have to explain yourself to the bank manager to get foreign money and have it marked on your passport but the travel trade is still living in this bygone age and using antique language like “commission”. You wouldn’t use obscure meanings and practices if you didn’t have something to hide.

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brat673 says:
23 December 2011

Govt accepts that fees for Cards are wrong and then says sometime later. Surely an Act should be so simple as a few words have our politicians got fee and minds of clay???.” Only the cost of the transaction can be charged but the general rule should be accepted as a normal cost of doing business.”

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