A combination of complex charges and misleading information means UK holidaymakers are paying too much for foreign currency, or using cards overseas, a watchdog has claimed.
Consumer Focus has today issued a super-complaint to the Office of Fair Trading (OFT) about the amount consumers pay for their holiday money.
In 2009, UK travellers spent around £27 billion while holidaying abroad.
Consumer Focus estimates that charges to customers for exchanging money are around £1 billion per year. It has called on the OFT to investigate how much of these charges are warranted and how much are excessive.
The watchdog has called on the OFT to investigate the following areas:
• Charges for using debit or credit cards overseas are unnecessarily complex and confusing for consumers. They vary significantly and make it difficult for people to establish the full costs and shop around for better deals
• Banks and credit card providers charge customers cash withdrawal fees when buying travel money with a card in the UK. These charges do not reflect actual costs – a debit card payment costs on average 9p to process and a credit card payment just 37p, yet charges for buying currency with a card are typically 1.5-2 per cent of the amount converted (up to a ceiling of £4.50)
• The use of marketing phrases such as ‘0% commission’ and ‘competitive exchange rates’ by suppliers is misleading and makes it difficult for consumers to make informed choices and compare banks with bureaux de change or the Post Office. In practice, the exchange rates already include mark-ups levied by suppliers and so are not fee-free as ‘0% commission’ implies
Consumer Focus is calling for the following measures to improve the market for consumers:
• Simplification of charging structures for using card overseas.
• Cash-withdrawal charges on UK transactions should be cost-reflective or even banned if not justified
• Clearer explanation of exchange rates used by suppliers to make comparison easier for consumers.
Mike O’Connor, Chief Executive at Consumer Focus 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. This is a huge difference for essentially providing the same service and typically banks offer the worst deals.
‘If holiday makers buy their currency from the Post Office, travel agent or bureaux de change many are stung with cash withdrawal charges by their bank, effectively for the privilege of taking money out of their own accounts.6
‘Individuals buy holiday money infrequently and so may not shop around much or may just stick with the same supplier.
“A cocktail of confusing charges and poor transparency means collectively we are losing out in a big way. We are calling on the OFT to investigate and work with the industry to send these dubious and complex charges packing.’