Big banks are still ripping off international money transfer customers with exchange rate markups says Transferwise
Although CommBank recently announced it was slashing upfront fees on international money transfers by as much as 70%, customers sticking with a big bank when sending funds overseas are still being ripped off, according to specialist IMT provider Transferwise.
According to Transferwise research, in 2016, Aussies travelling for holidays or work racked up a $1.1 billion bill when exchanging currency, $117 million of which was paid on cash exchanges made before heading abroad.
Just $4 million of this spend went to advertised, upfront transaction fees - like the charges recently reduced by CommBank - whereas a whopping $114 million came from exchange rate markups.
“Any time banks make international money transfer less expensive for consumers, it's good news. But sadly, most banks still tell their customers that they only pay a small upfront fee for international payments,” said Nicholas Lembo, Head of APAC Communications.
“In reality customers pay much more as huge hidden charges are taken in the form of the terrible exchange rates, often without the customer realising.”
Aussies shelled out another $930 million in exchange rate markups and fees on debit and credit card transactions overseas, while almost $170 million came from charges for withdrawing cash while jetsetting.
According to Transferwise, for every overseas trip taken by an Aussie globetrotter, an average of $180 goes down the drain on exchange-rate markups.
“By hiding charges in exchange rate markups, banks are able to make claims that they offer low fees for international money transfers. But the truth is that the typical exchange rate markup for a customer sending AU$1000 to the UK is between $50-60, in addition to whatever upfront fee the bank charges,” Lembo said.
The practice of wrapping extra charges into the exchange rate isn't unique to big banks, with IMT specialists, Western Union and even Paypal also applying these markups - though according to Transferwise research, they do so at a lower rate than the big four.
This can be a major cost for people transferring to foreign currencies, particularly those who exchange currency often, such as workers sending money to family overseas. For example, Aussies transferring AU$1,000 into US dollars with one of the big four banks can expect to pay up to $22 in upfront fees, and lose up to $58.91 to exchange rate markups.
Cost of transferring money overseas
Data via Transferwise*
“This just goes to show the power of shopping around and finding the best possible option for your money,” said Mozo Director Kirsty Lamont.
“If you’re heading overseas for a trip the last thing you want to think about is fees and charges. But it pays to be aware of them in your holiday planning, because getting an excellent exchange rate and skipping out on as many extra charges as you can means more spending money at your destination.”
Make sure you get the best bang for your foreign exchange buck by heading over to our international money transfer comparison page to find an IMT option that suits your needs.
*Rates correct at time of research, June 2017, but subject to change and should be taken as indicative only. Please see today’s exchange rates for updated information.