Mark founded MoneyMaxim in 2008, with the aim of delivering an impartial and independent service. Mark is a regular money saving expert in the press and writes regular news and articles for the MoneyMaxim news pages sharing his views on banking, personal insurance and the utilities (gas, electricity, mobile and home phones, broadband and pay TV) market with customers.
Cheaper currency on the cards
Charges made on travellers and holidaymakers by some banks when they buy foreign currency are being axed following pressure from the Office of Fair Trading (OFT).
Also the charges that they levy on debit card transactions, which can include a foreign transaction fee of around 3.0%, will now be clearly itemised on monthly statements.
The firms who have agreed to remove additional charges levied when purchases of foreign currency are made are Lloyds, Barclays, RBS, Santander and the Co-op who currently make charges of between 1.5 and 2% if customers use their debit cards to buy currency in the UK before going on their trip. Nationwide, HSBC, First Direct and Halifax Bank of Scotland are not impacted as they do not charge these fees.
During their investigation the OFT identified that travel money companies made £1bn a year from such charges whilst Consumer Focus reckon the changes will trim £20m from this.
So what is the impact?
Currently the banks affected charge a ‘penalty' to their customers who have the audacity to buy their currency from a exchange dealer, supermarket such as Tescos, store such as Marks and Spencer or Debenhams or alternative bank. As this fee is often in the region of 1.5% – 2% (normally though with a maximum charge of £4.50) which can means a ridicuous charge of £4.50 on a transaction of £225 or more.
That means that unless the exchange rate quoted is substantially better elsewhere often its easier to use your own bank and accept a substandard rate.
The changes will mean that its easier to compare rates and find the best deal without the worry of extra charges being levied.
For instance today Euros can be bought today through ICE (International Currency Exchange) at a rate of 1.1739 for every pound. In a Barclays branch today they are quoting 1.12. On a purchase of £500 of euros thats a difference of over £25! Until todays changes have been implemented that ‘advantage' is reduced by the £4.50 fee but its still a sizeable difference.
Mark Bower, Managing Director of MoneyMaxim said today ‘For the big banks these fees are not just a money earner in their own right, but they create an impression in customers minds that its not worth shopping around. With such marked differences in the rates offered by both specialist moneybrokers and new entrants into the market like the supermarkets and those available from high street banks customers can make worthwhile savings on fairly modest sums. There are now a number of comparison services around, including one on our site, which allow you to track down the best travel money rates.
Until now often the only way to avoid the charges was to use a hole in the wall machine to withdraw cash which can then be used to buy the currency, but this left little option but to cough up if you wanted to buy online.
Its not even as if the banks ‘cost structure' for offering foreign exchange services is that different from the specialists, as most sizable transactions through branches now require pre booking and are delivered to a local branch for collection, a very similar model to the home delivery service currency service offered elsewhere.