Taavet Hinrikus of TransferWise calls for greater transparency in the fees banks charge you to buy holiday money or transfer money abroad.
If you’ve ever transferred money internationally through your bank, you’ll know that something doesn’t quite add up. You think you know what you’re getting: you see the exchange rate in the papers or on Reuters online, the bank tells you that the transfer is ‘free’ or ‘fixed fee’… but then you find a chunk of your money’s gone missing. Where does it go? It goes to pay the fee that the banks say they’re not charging you.
They might say it’s ‘free’, but they’ll then apply a mark-up on the exchange rate that they often don’t tell you about. This mark-up is usually 3-5% – that’s as much as £50 on a £1,000 transfer. That means people across the UK could be losing as much as £3bn a year in hidden fees on their international transfers.
Hidden international transfer fees
I used to get paid in euros but was living in London so had to transfer money every month through my bank. Not only was the process slow and pretty painful, it was also costing me money in hidden fees: I would never know how much was actually going to end up in my account. I couldn’t believe how unfair it was.
So I started swapping my euros for pounds with my friend Kristo, who needed to send money in the other direction. We used the mid-market rate – the real rate that you see in the papers, and the one the banks use between themselves. We soon saved thousands of pounds and that’s how we came up with the idea for TransferWise.
We realised there were millions across the world who are getting an unfair deal from their banks and brokers. There are students studying abroad, people paying for holiday homes, expats who need to move their salaries across borders. They’re all losing money in hidden fees.
Buying holiday money
And it’s a similar story if you’ve looked at how much you had to pay for your holiday money after arriving back from a well-earned break. Despite being charged ‘0% commission’, the fees are once again hidden in the exchange rate. In fact, an estimated £1.3bn in hidden fees were paid by Brits in 2013 for their holiday money.
People are increasingly fed up with being stung by hidden costs, as Which?’s Sneaky Fees and Charges campaign has shown. People just want to know what they’re being charged. Surely, customers have a right to know what they’re paying?
That’s why we’ve launched our Stop Hidden Fees campaign, calling for an end to misleading pricing in foreign exchange. And if you’ve been hit by hidden fees on international transfers or holiday money, tell us your experiences below.
This is a guest contribution by Taavet Hinrikus, co-founder of TransferWise. All opinions are Taavet’s own, not necessarily those of Which?