Travel money: save more than $100 and don't get ripped off
Australians love to travel but when it comes to using money, they are often ripped off.
Australians paid $2.14 billion in fees for accessing money overseas in 2018. This was for overseas card transaction fees, card ownership fees, overseas ATM withdrawal fees and hidden exchange rate mark-ups when they used an Australian debit or prepaid travel card overseas, according to independent research conducted by Capital Economics.
And it is getting worse. Capital Economics found that in the last five years, transaction fees on travel and prepaid cards have more than doubled from $70 million to $174 million. The company says when it comes to exchange rate mark ups, bank-issued travel cards and prepaid cards are the worst offenders compared to other payment methods, costing Aussies $188 million last year alone.
These findings come ahead of the ACCC's report into the supply of foreign currency conversion services in Australia.
The report was triggered by the World Bank's findings that the cost of sending money from Australia is significantly higher than both the G20 average and the global average cost. In fact, the World Bank found that Australia was the third most expensive G20 country to send money from. Australians sent around $8.8 billion overseas in 2016.
The ACCC has been looking at pricing and costs of foreign conversion services and whether there are impediments to effective price competition in the sector. It also examined how the fees are communicated to customers.
So it is not surprising that disrupters are shaking up travel money services. One of the disrupters is TransferWise, a technology company that moves money internationally. It launched its debit card in Australia last week.
The debit card has no transaction fees, no monthly fees or non-transparent exchange rate mark-ups. It also allows you to have bank details for different countries such as the US, UK, Eurozone, Australia and New Zealand so you can send and receive money in those currencies. It has five million customers around the world and processes $7 billion for customers every month.
TransferWise found that people typically cannot identify the cheapest transfer when given a range of options. In fact, 66% couldn't tell them apart, according to research carried out by BIT Research.
TransferWise says its money transfer service is up to eight times cheaper than the banks, Qantas and PayPal, largely because it uses a more generous exchange rate (see table below).