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'Travel money rip off – what the OFT needs to do' blog discussion
Former_MSE_Helen
Former MSE 2.4K Posts
This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.
Please click 'post reply' to discuss below.
Read Martin's "Travel money rip off – what the OFT needs to do" Blog.
Please click 'post reply' to discuss below.
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I bank with Halifax/HBOS
I went to a branch on wednesday to order some $, they were ready for collection on thursday.
As i paid for them direct from an account, there was no commission payable.
The rate was ~1.52.
Im sure that if i wanted to spend my time shopping around, i could have got a slightly better rate, but then i would have also had to compare the different commission rates, & whether i would get charged if i paid for the currency using my card.
I also have to take into account getting to the branch of a provider to order it, & to collect it.
Comparing the main providers, it's cost me ~£2 to use my bank.
However, I am willing to pay that for the service i received, the ease of doing it, & that they then put a note on my account recording the fact that I will be abroad.
I understand that using my card abroad or getting foreign currency from my bank incurs cost and risk for them and that therefore there will be a charge for doing so.
However, this charge must be proportionate and reasonable otherwise I'm not being treated fairly and am subsidising those customers who don't use their accounts overseas.
Transparency is one element to this and I agree that bank statements should separately identify the currency loading and any ATM or debit card usage fees levied by your own bank.
Beyond that - I think a simplified 'cost of currency' measure is required where the spread an FX company charges, the currency loading fee and any commission is expressed as a percentage of the amount exchanged with reference to the wholesale visa/mastercard rate - that way consumers will be able to see the cost more clearly at the point of sale.
Charges per transaction I am against in principle, particularly for debit card use, unless the bank is clearly incurring a fixed cost. Banks should be charging retailers enough to cover their processing costs and it is up to the bank providing the ATM in the foreign country as to whether they charge for providing the maching and loading it with cash.
If banks must charge it should be proportionate to the costs they are incuring and certainly less than £1 per time!
R.
As per my previous post;
I purchased some $ notes, therefore whenever I spend them, I am spending at a fixed exchange rate.
With a pre-paid currency card, once it is loaded, all the transactions are at a fixed exchange rate.
So if I were to travel to Europe, & spend Euros on my card;
i inform the bank that i will be in europe between certain dates
that i wish to use my card to pay/withdraw in euros
> they offer me a fixed exchange rate for the time period i have given them
then, i know what things are costing, & im not subject to changes in the exchange rate
I imagine that they don't because that potentially opens a loophole that could badly hurt them if the exchange rate changes in the customer's favour.
For example, initial exchange rate (after commission and charges) is £1 to $1. The bank guarantees to honour that rate for the next three weeks as the customer goes out to the US.
The pound then drops substantially in value - for the sake of simplicity, lets say it drops by half and the exchange rate becomes £2 to $1.
The customer withdraws £100 worth of dollars, giving them $100 and costing the bank £100 to make up the difference. A lightbulb goes on in the customer's head and they walk to the nearest US bank and deposit the $100 into their account (worth £200). Even if the bank charges 10% commission, the customer's gets £180 added to their bank despite only withdrawing £100. The customer then changes £180 into $s, etc.
In order to limit the risk exposure, the bank would have to limit the amount of money you could withdraw under the fixed exchange rate scheme. And by that stage, it gives virtually no practical advantages over buying the money in cash, travellers cheques or prepaid card.
Plus, it would be more expensive - you can bet that a customer would take advantage of the loophole to maximise their cash if the opportunity arose but, if the exchange rate went the other way, the bank wouldn't make up the money because a savvy customer would then use a local bureau de change (or other alternative) as it would offer a better rate.
After taking that into account, you'd have to apply higher charges or a worse exchange rate...and so no-one would actually take them up on the offer.
It is a cash withdrawal albeit not in £ sterling.
Whilst I would not expect a charge for this on a debit card I certainly would on a credit card in accordance with their standard T&Cs.