Travel money inquiry: Investigation into bank rip-offs for card use abroad and currency conversion
Rip-off: Greedy banks are conning customers who draw money out overseas, says Consumer Focus
Millions of holidaymakers are being ripped off when trying to buy foreign currency or use their cards abroad, according to Consumer Focus.
The official customer body claims banks are charging hard-pressed families up to 1billion a year when dealing with travel money.
The complaint has triggered an Office of Fair Trading inquiry into why charges to convert currencies vary so much and the shady business of charging holidaymakers to use their debit and credit cards abroad.
Consumer Focus claims there is no good reason why the charge for converting 500 to euros can vary from around 10 to more than 30.
And it said Britons abroad are kept in the dark about the fees applied every time they use a debit or credit card to buy a meal, hire a car or withdraw money.
The finance giants generally take a percentage of the value of any foreign card transaction and then add a second service charge.
As a result, someone taking 200 out of a cash machine with a debit card can be charged about 10. The situation is made worse by the fact that these charges are usually not spelled out clearly on customers bank or credit card statements.
Instead, banks take their cut through a mechanism known as exchange rate loading. This involves giving the customer a poor exchange rate when converting the value of any overseas transaction back to sterling.
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Consumer Focus also warned the public against foreign currency firms promising zero commission.
It said they generally take a fee by rigging the exchange rate.
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The watchdog also believes people are being overcharged when using debit cards to buy foreign currency on the high street. The processing cost is around 9p, but customers can be hit with a service charge of up to 4.50.
Consumer Focus chief executive Mike OConnor said: Almost half of us travel abroad every year and we face a confusing array of often hidden charges every time we buy currency.
Converting 500 into euros can cost from under 10 to over 30 depending on w! here you switch your money. This is a huge difference for essentially providing the same service, and typically banks offer the worst deals.
He added: 'If holidaymakers buy their currency from the Post Office, travel agent or bureaux de change many are stung with cash withdrawal charges by their bank, effectively for the privilege of taking money out of their own accounts.
'Individuals buy holiday money infrequently and so may not shop around much or may just stick with the same supplier.
'A cocktail of confusing charges and poor transparency means collectively we are losing out in a big way. We are calling on the OFT to investigate and work with the industry to send these dubious and complex charges packing.'
The watchdog has raised a so-called super-complaint with the OFT. This requires the organisation to carry out a formal investigation and decide if action is needed.
Debit card charges alone could add almost 45 to the cost of a two-week family holiday, according to personal finance experts at the Moneynet website.
The British Bankers Association said currency exchange and card charges reflect costs.
It said: Transaction costs abroad are driven by the costs of overseas payment systems, often in countries where free banking does not exist. We are disappointed that Consumer Focus chose not to engage with the industry before it issued this complaint. The banks will now work with the OFT.
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