Families lose £45 in rip-off foreign exchange fees on average every time they go on holiday

Families are wasting an average of £45 in rip-off foreign exchange fees every time they go on holiday, new research has claimed. 

This is by using expensive credit and debit cards and exchanging money at pricey foreign exchange agents.

The average cost of a family summer holiday is £1,521 and over 19 years, this adds up to a total of £845 in unnecessary charges.

The digital currency firm, Transferwise, which conducted the research, says traditional foreign exchange firms are misleading people.

Instead of giving the total cost for changing money, many advertise holiday money or international transfers as ‘free’ or as a set charge, but make the bulk of their profits by offering a poor exchange rate and then pocketing the difference.

It says banks often make up their own exchange rate, which can be much higher than the interchange rate as shown on Google. 

As banks rarely show how much the fee is, the firm says consumers are unaware how much extra they’re paying when they transfer money. 

For example, data from Consumer Intelligence showed that if you spent £200 on a UK debit card within the European Union, you would be charged £14.32 with Santander, £12.89 with Lloyds, £11 with Barclays and £9.95 with Natwest. The fees would be similar if withdrawing the same amount of money in cash. 

Transferwise calculated that over a lifetime, Britons lost an average of £16,796 in extra fees when spending money overseas. 

This included spending money on family holidays, city breaks, overseas retirement and weddings between the age of 16 and 65. It asked 13,000 people to calculate the cost of these outgoings, which came to £207,022.

Consumer Intelligence then analysed the data against the average exchange rate mark-up charged by a high street bank. This was £4,791 on average over the 49 years, or £97 per year. When adding inflation of 2.59 per cent, this increased to £16,796, or £350 per year.

The Fight Overseas Fees campaign, launched earlier this year by Transferwise, Plum and Resolver, was set up to show exactly how much consumers are charged when transferring money.

Ouch: Spending £200 on a UK debit card in the EU will cost £14.32 with Santander

The campaign’s website has a live calculator where you can find out exactly how much you have paid out in fees in the past year. 

It enables users to put in some details – which are only held for an hour and read-only – and it will work out the amount you have spent in bank fees. It can also estimate this if you don’t want to enter any details.

Jenifer Swallow, general counsel at TransferWise, says: ‘As schools break up for the summer, thousands of British families will be heading away for their annual trip abroad. 

‘School holidays are one of the most expensive times to go away and today’s findings reveal how much family budgets are being further stretched by hidden fees in foreign currency. Over a lifetime these fees almost add up to an extra holiday!

‘It’s vital that consumers check the rate they’re offered against the real exchange rate on Google, and stop taking claims of ‘fee free’ or ‘0 per cent commission’ holiday money at face value.’ 

The firms behind the new campaign have set up a petition to stop companies using hidden fees and it currently has 46,779 signatures. It says for every foreign exchange transaction there should be a clear breakdown of the cost of the service. 

When changing money, the mid-market rate should be offered or if not it should be shown in comparison to the rate being charged. The campaign is also calling for a crackdown on terms such as ‘free’ and ‘0 per cent commission’ which can be misleading.  

Martyn James, spokesperson at Resolver, adds: ‘I’d urge anyone who’s spent money abroad with their bank to try the fightoverseasfees.org calculator so they can see for themselves if they’ve lost out to bad exchange rates.

‘Complaining to the Financial Ombudsman will help to put a stop to these rip off practices – families are losing out on thousands in poor exchange rates that they have no idea they’re spending.’