ACCC calls to end foreign currency fee rip-offs

The ACCC is warning Australians about massive foreign currency exchange fees after a damning report revealed how much we’re being ripped off.

Australians seeking to convert foreign currencies, particularly for international money transfers, could save hundreds of dollars by shopping around.

More than $40 billion in foreign currency transactions take place in Australia each year.

The Australian Competition and Consumer Commission (ACCC) has found in a report released on Monday that prices are hard to compare, customers rely too heavily on the big four banks, and payment cards are generally cheaper than other methods.

Australian consumers were paying higher fees than those in other countries, the ACCC said.

In some circumstances Australians are paying 30 per cent more than those in the US for the same service.

In one example, a customer transferring $10,500 to the United States could save up to $550 by using the cheapest provider.

The ACCC says Australians are being ripped off when dealing with foreign currencies.

ACCC chair Rod Sims said consumers and small businesses tended to default to their usual bank to send money overseas, but this wasn’t always the cheapest option.

“This is another example where consumers may end up paying more for their loyalty,” Mr Sims said.

Consumers could have saved about $150 million in 2017-18 if they had used smaller international money transfer agencies, rather than the big four banks, for US dollars and British pounds, the report found.

The report found cash was more expensive at the airport than other locations, and when using a credit or debit card overseas, consumers should avoid the option of paying in Australian dollars as this is usually a more expensive option. Australians could have saved $40 in February 2019 by purchasing $US200 at a non-airport location, rather than at an airport, the report found. The watchdog has recommended an increase in competition and lower transaction fees.

Australians could have saved about $150 million in 2017-18 if they had used smaller international money transfer agencies for US dollars and British pounds, the report found.

It found new entrants to the foreign currency market were already delivering better outcomes for consumers, but these smaller businesses were being cut off from banking services due to anti-money laundering or counter terrorism laws. Mr Sims said this posed a threat to competition, with the commission recommending introducing a scheme to help these smaller businesses navigate those laws until the end of 2020.

RELATED: Australia’s 10 biggest rip-offs

The report recommended international transfer and foreign currency service providers be upfront about the total service costs for customers. Treasurer Josh Frydenberg said the ACCC would report back to the Government in a year on how industry is responding to its recommendations.

He has not ruled out taking further action to ensure customers are not being ripped off.

Currency exchanges at airports are notorious for ripping off consumers.

HOW TO AVOID GETTING RIPPED OFF

• Don’t rely on the big four banks when transferring money overseas or exchanging currency for your holiday. Smaller, international agencies often offer lower fees, so shop around.

• Avoid exchanging currency at airports — they usually offer the worst exchange rates and higher fees. Go to currency exchanges in CBDs, as they tend to be more competitive.

• Don’t leave it until the last minute to exchange currency. Spend time comparing rates online, and sign up to exchange rate trackers to see how the Australian dollar is faring against the currency you need.

• Avoid paying in Australian dollars if you’re paying by card overseas. It is usually the most expensive option.

• Consider a travel money card, which allows you to purchase foreign currency in advance with locked-in exchange rates. They also have low, or no, ATM withdrawal fees and don’t have the massive international transaction fees of regular credit cards.

News.com.au has shared its tips on how to avoid paying more on foreign exchanges as part of its series Rip-off Buster, which provides readers with practical cost-of-living advice and hacks on how to help get a better deal — all with the goal of helping you to become financially fit.

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