Let’s face it Australia, when we go on holiday, there’s nothing we wouldn’t do to have a good time. But unfortunately, our ‘go big’ mindset can often mean falling into traps, particularly when it comes to foreign exchange.
According to Capital Economics, in 2016, Aussies spent over $1 billion in fees and poor exchange rates, and with the number of travellers jumping in the last 10 years, that number is expected to have increased today.
One of the most common exchange traps Aussies are falling for before jetting off is being fooled by the ‘no commission’ signs at exchange booths. Matt Hayja, Head of Foreign Exchange Products at Citi’s Consumer Bank says this can be misleading.
“It’s essentially correct, there is no commission being paid but what the consumer needs to be very aware of is ‘the total cost’. If I go up to a booth and I want US $100 and it costs me $120 with no commission, great. But if I pay commission at another place it might cost $115 and their exchange rate is so much more attractive.”
Exchanging currency at the airport and using dynamic currency conversion were also common holiday mistakes.
Dynamic currency conversion is particularly tricky as many Aussies don’t even know what it is.
“It’s certainly not a good proposition for a customer. Essentially it’s where a terminal will ask whether you want to pay in your local currency or whether you want to pay in a foreign currency,” explained Hayja.
“If you were to accept your local currency, you’re allowing this terminal to determine what exchange rate you get and what you pay - it’s a large markup of generally 5%-15% as opposed to accepting it in that local currency.”
Moving on from the big four
Assuming that the big four banks will provide a good rate is also a nationwide misconception among many Aussies, but according to Hayja, it’s a mistake brought on by a need for security.
“I believe that money is something people are conservative about and some people are willing to pay premiums for that security with the banks,” said Hayja.
“The average customer would not be aware (of other options), they would walk into their CBA branch or their Westpac branch and do what they have to do. Thankfully some banks, like Citi and other non-major players, are stepping up to the plate with disruptive offerings that do offer a better exchange rate for consumers.”
So if you’re keen to start saving on your next holiday, our travel money hub can help you compare a range of options, including the Citi Global Currency Account, a bank account that allows you to hold up to 10 currencies and has no transaction or ATM fees no matter where you are in the world.
The foreign exchange game changer
One regulator taking on the foreign exchange industry is the ACCC, announcing in early October it would be making an enquiry into how big banks and other major companies are able to charge high prices to customers and how prices are presented.
Hayja said Citi welcomed the changes.
“We’re very happy that this has come forth, we’ve been very transparent and very open and competitive with our exchange rates for a very long time. For consumers, I can’t see it as a bad thing, when the spotlight comes on foreign exchange rates and once the big players come forth and agree to these findings, I think we’re going to see a much more competitive market.”
Foreign exchange without leaving the country
But it’s not just Aussies heading off on a holiday that need to be concerned with foreign exchange traps. Data from Capital Economics has also revealed that Australia ranks 10th highest in the world for transferring money overseas, with over $17 billion transferred back in 2012.
And for the Aussies sending money to loved ones overseas this Christmas, rookie mistakes, like signing up to the first deal instead of shopping around on exchange rates could see Aussies miss out on competitive rates and lower transfer fees.
“Rates can range dramatically. Simply comparing between more than one provider (a 5 minute exercise) can mean savings in the thousands,” said Head of Dealing at WorldFirst, Patrick Liddy.
Misjudging transfer limits before the Christmas cut off date is also something for Aussies to keep in mind.
“Some entities don’t allow transfers under a certain amount or charge a wider margin or even a fee for small transfers. Make sure your provider is offering the best deal possible for your circumstance,” said Liddy.
So if you’re ready to save on your next international money transfer, head on over to our IMT comparison tool to check out today's exchange rates.