Charges for Currency Purchase on Debit Card in the UK

chrisparky

This issue may have been identified before but I can't find any obvious posts relating to it - and it has really ticked me off. I would be interested to know if anyone else has been 'stung' this way.

I have banked with Smile for over 5 years and, overall, I have been very satisfied with their services and service levels. In particular, I value the ability to use the local Post Office to pay in cheques and withdraw cash using my Smile Visa Debit Card at no charge to me.

To my dismay, I have recently discovered that, when I use my Visa Debit Card to directly purchase currency at the Post Office then Visa charge a 0.5 percent fee.

However, if I withdraw the cash first using the same Debit Card and THEN purchase the currency there is no fee.

I have raised the issue with Smile who are apologetic but say it is a charge imposed by Visa and they can do nothing about it and certainly cannot refund the charges I incurred on earlier currency transactions where I had not noticed the separate fee.

I have pointed out that it seems inconsistent to claim to be an ethical bank and then not point out to customers that they will incurr unnecessary charges if they use their Debit Card in the UK to buy currency - when they can withdraw the cash first and then buy the currency separately.

There is one possible 'value added' element by using the Debit Card in the UK. It will allow you to purchase currency greater than your daily cash withdrawal limit. However, this isn't really a benefit as the cash still comes directly out of your current account and, if you did not have the funds in the account, I assume the transaction would be declined.

If you need to buy currency greater than your Debit Card limit then you can withdraw the cash over however many days it takes to have the amount you need - or I guess you can ask for the daily limit on cash withdrawals to be raised. My current limit is £250 and I have had no need to have a higher limit in any other circumstances where I have needed cash.

Clearly, there is a benefit in being able to use the Debit Card to purchase currency when abroad and a charge seems valid in those circumstances. But such charges in the UK are basically a 'rip-off' and, if (like me) you did not spot the charges, are completely without value - and basically hidden.

I raised it with the local Post Office staff and they said they were aware that there might be charges for various transactions with various financial institutions - and usually mentioned this to customers - but it was up to the customer to know what was and was not charged by their financial institution. As all my other Smile transactions at the Post Office were at no charge I assumed purchasing currency using the same Debit Card to take money directly out of my account would be the same.

Has anyone been in the same situation - with Smile? With other banks? More importantly, has anyone been able to recover such charges or have any suggestions about how to recover them?

Cobi

http://www.thisismoney.co.uk/saving-and-banking/article.html?in_article_id=414877&in_page_id=7

YorkshireBoy

chrisparky wrote:

I have pointed out that it seems inconsistent to claim to be an ethical bank and then not point out to customers that they will incurr unnecessary charges if they use their Debit Card in the UK to buy currency...

Setting aside the issue of the charge itself, they do "point out" the charge in the Smile account tariff & T&C's.

Has anyone been in the same situation - with Smile? With other banks?

No, I use my Maestro card which, as you'll have seen in the link provided by Cobi, is run by Mastercard and carries no such charge.

Biggles

To my dismay, I have recently discovered that, when I use my Visa Debit Card to directly purchase currency at the Post Office then Visa charge a 0.5 percent fee

Can't see why you're bothered, frankly.

You seem happy to pay the Post Office's charge of around 6% for the privilege of selling you foreign currency, another ½% is pretty small beer, isn't it?

chrisparky

I have checked the T&C and it does not seem to me to be at all clear that a fee would apply to currency bought in the UK as opposed to abroad - if not ambigous then unclear. And, if you are going to buy currency anywhere - Post Office or other - then the fee can be avoided by withdrawing cash.

I didn't want to end up with multiple credit cards - hence no MasterCard.

The charges at the Post Office are a separate issue, Biggles - I live in a small town - with three mainstream banks in the high street - any particular bank you recommend? or is it better to get it at the airport? or take sterling and convert when abroad? or another method (via internet)? Any cut-off points in terms of amounts (minimums etc)? You obviously seem very knowledegable about all this and I would frankly appreciate you helping me save the fees for beer - however small.

oldfella

there is a VISA charge for buying cash or foreign currency from an organisation that is not your bank - I believe the maximum fee is £4.50

Mike

EvilEdna_2

Chrisparky - some banks don't charge commission for foreign currency purchased at the branch, and some charge less than the post office. Most of the time they require you to be a customer of that bank, however. Do Smile offer the option of purchasing currency directly through them? You might find that this is cheaper.

Biggles

The charges at the Post Office are a separate issue, Biggles - I live in a small town - with three mainstream banks in the high street - any particular bank you recommend? or is it better to get it at the airport? or take sterling and convert when abroad?

Top value is to use your credit or debit card (Smile charge 2.75% + £2 for withdrawals and 2.75% for purchases but Nationwide charge absolutely nothing at all) in an ATM when you get there. All airports have them. Lower charges, less cash to carry around, not too much foreign currency left over if you find you'd ordered too much.

Banks? I recommend none, they all charge at least as much as the Post Office. Don't be fooled by notices saying 'No commission'. It is a lie (they are only allowed to say that while they don't make a flat-rate commission charge. They can include as high a % charge as they like in the conversion without bothering to mention it. It's good being a bank, isn't it? ;-)

And don't use airport or High Street bureaux de change unless as a last resort, as you will be ripped off.

Kilty_2

Do Nationwide charge you for purchasing foreign currency at the post office using your debit card?

Be a bit ironic if they do, considering they don't for withdrawing foreign currency abroad...

Biggles

No, it would count as a cash transaction, that's all, so if it were a credit card there would be the 2% (min £2) transaction fee but that doesn't apply with a debit card.

chrisparky

Smile will sell currency directly but, because it is an internet bank, they have to courier the money to you - I think the courier fee was quoted as £4.50 - which even the guy at Smile on the phone agreed sort of defeated the purpose. I didn't go into just how much lower their explicit purchase charges or implicit commission rates by purchasing directly were than the Post Office - I assume they are still the same as the ones discussed in this thread and still regarded as at the expensive end anyway.

I suppose the main outcome of this discussion is that there seems to be a lot of confusion as to how to interpret commission rates and fixed fees in currency purchase and how they relate to the real market rate on any given day.

I am sure it is not in the banks' interest to clear up this confusion - otherwise, in my case, Smile would have a clear explanation about exactly what costs are involved in using the Post Office (as it, in effect, acts as its branch) - both in terms of current Post Office fees/commissions (Biggles reckon they are 6%) and Smile charges if a Debit card is used - or not (by suggesting that cash be withdrawn first - this was what got me ticked off in the first place).

Similarly, they could illustrate the likely maths on using a Debit Card in a bank machine in whatever country you are in (as recommended by Biggles as the best overall bet) - local charges and Smile charges.

Has anyone on here .. Martin? .. written a paper which tried to identify all the possible permutations of cost elements that each bank could include in any currency purchase and how to estimate the true charges? I suppose the range of permutations and number of banks would make this daunting.

Although it wouldn't take much for each bank to have currency conversion calculators on their web sites to allow a customer to validate and understand a given fee - or it would be a nice tool to have on here, too, so that people could verify fees charged.

Sorry, getting carried away here. I will do as I did when I went to Ireland over Xmas. I left it too late to get to the Post Office and took the sterling, which was converted by a charming old lady in a Post Office in what appeared to be the front room of her house in the village where I was staying. The fee and rate were clearly stated on the receipt - although I had no idea if the conversion rate was a good one. Similarly, when I used my Debit Card to withdraw euros at the supermarket in the same village later in the week. So I suppose I followed Biggles' advice by chance - but it did start me thinking about Post Office/Smile charges in the UK and currency conversion generally.