According to Consumer Focus, holidaymakers are charged around £1 billion a year on £27 billion of overseas spending: the organisation admits that it is unsure of to what extent these charges are warranted and has called for a full OFT inquiry.
But Consumer Focus also believes that charges for using debit and credit cards abroad are “unnecessarily complex and confusing”, and make it difficult for individuals to compare costs or shop around.
The watchdog also criticised banks for adding fees when customers used their cards to buy foreign currency in the UK. It said that a typical debit card payment cost 9p to process, yet some buyers were charged as much as £4.50 simply for using their cards to buy euros or dollars.
Marketing phrases such as “0 per cent commission” were also described by Consumer Focus as misleading, given the fact that many of these deals already include mark-ups on the exchange rates offered.
A wide range of charges
Consumer Focus’s chief executive Mike O’Connor 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.”
O’Connor added that consumers were reluctant to shop around for the best deals because they only rarely bought holiday cash or went abroad.
Cut the cost of spending
There is no need to wait for the conclusion of the OFT’s investigation to get a decent deal on holiday spending, however. There are already a number of ways you can pay less for your foreign cash.
- Use a card which charges little or nothing for cash-machine withdrawals and spending abroad.
- This should almost always be a debit card, especially for use at ATMs, where credit-card charges can be extortionate.
- Norwich & Peterborough Building Society has a card which charges nothing for foreign transactions, while among more mainstream providers Nationwide’s FlexAccount debit card charges a 2 per cent fee plus a fixed £1 for cash withdrawals, and 2 per cent for purchases.
- Compare this to Natwest and Santander, both of which charge 2.75 per cent plus £1.25 for each purchase.
- Order your currency online. The best rates are usually available via the internet, provided you order in advance of your trip. Cash can either be delivered to your home, or collected from your departure airport.Buying at the airport at the last minute will be much more expensive.
- Finally, don’t opt to pay in sterling at your destination: many retailers and hotels, especially in popular resorts, now give UK tourists the choice of paying in pounds rather than the local currency.
- This may seem convenient and transparent, but the chances are the rate used to convert euros, say, into pounds is uncompetitive and you will end up paying more than if you had settled your bill in the destination currency.
What do you think? Tell us by commenting below and if you want to share your thoughts with Consumer Focus, it is calling on the public to assist by sending evidence of complex charges or misleading marketing to this email address: email@example.com.