OFT to investigate currency charges after 'super complaint'

Downsizing__for_sanity

I recently bought 50 euros for my husband at Thomas Cook, as he had a short trip with work. My receipt said 45 quid-odd, but my bank statement said £47 had been taken. Do I assume that RBS charged me for buying currency with my card? The travel agent didn't mention it at the time. I looked around for the best rate, so I'm annoyed that I paid £2 on such a small amount, when I guess I could have just taken it out of the bank and paid in cash. Grrrr. Also annoyed with the bank for not showing separately as a charge, rather than adding it to the cost.

DFS

benjus

Downsizing__for_sanity wrote: »

I recently bought 50 euros for my husband at Thomas Cook, as he had a short trip with work. My receipt said 45 quid-odd, but my bank statement said £47 had been taken. Do I assume that RBS charged me for buying currency with my card? The travel agent didn't mention it at the time. I looked around for the best rate, so I'm annoyed that I paid £2 on such a small amount, when I guess I could have just taken it out of the bank and paid in cash. Grrrr. Also annoyed with the bank for not showing separately as a charge, rather than adding it to the cost.

DFS

From http://www.rbs.co.uk/downloads/global/docs/RBS-Ts-and-Cs-Fees-Interest-Helping-You.pdf

Purchase of foreign currency or travellers
cheques using a Visa Debit card:
• in any Royal Bank of Scotland branch : No charge
• in any other bank, travel agent, bureau de change or other outlet displaying the Visa logo : 1.5% (minimum £2, maximum £4.50)

Doshwaster

I agree, it's time this whole sector was cleaned up.

I have no problem with banks making money out of buying and selling currency and providing overseas banking services - they are in business to make a profit after all - but they are just preying on people who aren't switched on to know any better.

The Post Office is one of the worst culprits. They rely on the fact that people trust them to get away with offering such uncompetitive rates.

zagfles

NFH wrote: »

Nice idea, but it's unworkable. There is no official interbank rate, as there are multiple electronic interbank brokers (e.g. EBS, Reuters, Currenex, Hotspot, FXCM etc), and the prices change every second. It would be impossible for bureaux de change to publish such an interbank rate against which their more static retail rates could be compared.

One answer could be for the percentage of half of the spread to be published alongside the rates, but this still doesn't reflect the true percentage difference from the wholesale rate, because the bureau de change's margin may be different on the bid and the offer depending on supply and demand for banknotes in a particular currency.

OK, based on a reputable interbank rate of their choosing (after all they probably use some interbank rate as the basis for their buy/sell rates), and updated at a time interval of their choosing.

But just ONE rate quoted, no buy/sell rates, with commission explicitly highlighted. For example:
"Rates bases on the Reuters interbank rate as at 1800 the previous day. Commission 5% to buy, 7% to sell, minimum £3".

They could add a right to update the rate more frequently in the event of large currency movements.

Becca79

Downsizing__for_sanity wrote: »

I recently bought 50 euros for my husband at Thomas Cook, as he had a short trip with work. My receipt said 45 quid-odd, but my bank statement said £47 had been taken. Do I assume that RBS charged me for buying currency with my card? The travel agent didn't mention it at the time. I looked around for the best rate, so I'm annoyed that I paid £2 on such a small amount, when I guess I could have just taken it out of the bank and paid in cash. Grrrr. Also annoyed with the bank for not showing separately as a charge, rather than adding it to the cost.

DFS

We've just had a similar experience. My boyfriend purchased some Euros using his Barclays debit card, the receipt said one amount, but his bank statement has an additional 2% charge on the transaction (but not itemised separately). If the card has been debited in sterling from a UK outlet how is that different from any other purchase in sterling? I have bought Euros from the same place using my Halifax debit card and haven't had any extra charges.

NFH

Can anyone explain why bank customers are being charged for buying foreign currency at bureaux de change with a debit card? How do the banks identify the transaction as being a purchase of foreign currency? Are the bureaux de change using a transaction type of "cash advance" instead of "sale"? If so, I see this as the fault of the bureaux de change, because they really should specify it as a "sale" and absorb the 20p or so they are charged for accepting a debit card; their margin easily covers this in the same way that a sale of any other product or service would.

zagfles

NFH wrote: »

Can anyone explain why bank customers are being charged for buying foreign currency at bureaux de change with a debit card? How do the banks identify the transaction as being a purchase of foreign currency? Are the bureaux de change using a transaction type of "cash advance" instead of "sale"? If so, I see this as the fault of the bureaux de change, because they really should specify it as a "sale" and absorb the 20p or so they are charged for accepting a debit card; their margin easily covers this in the same way that a sale of any other product or service would.

It is really a "cash advance", as you're getting cash albeit a foreign currency. But then,so what? So's an ATM withdrawal, or cashback in a supermarket, but the banks don't charge for that.

It's a pure rip-off on the part of banks, you're buying foreign currency but lining someone else's pocket instead of theirs, so they want a piece of the action. They seem to think they have a right to rip you off when you go abroad, in the same way that the mobile companies, travel agents, insurance companies etc do.

NFH

zagfles wrote: »

It is really a "cash advance", as you're getting cash albeit a foreign currency. But then,so what? So's an ATM withdrawal, or cashback in a supermarket, but the banks don't charge for that.

The raison d'être for the "cash advance" transaction type is so that the cash advance provider receives a fee from the card issuer for making the cash advance. It is assumed that the card will be debited in the same currency as the cash itself, meaning there is no scope for profit unless the cash advance provider receives a fee. Whereas for a sale transaction, the merchant pays a fee to the bank, for a cash advance, the merchant receives a fee from the bank, in a similar way to how an ATM operator receives a fee. Given that the cash and card transactions are in different currencies, there is no justification for the bureaux de change to transact as a cash advance, which results in fees being paid by the card holder to their bank, and by the bank to the bureau de change.