Going overseas is expensive as it is, but throwing extra charges for currency conversions and ATM fees on top can push your budget over the edge.
It turns out Aussie consumers are paying way too much for foreign currency conversion services because of confusing pricing and a lack of competition, the Australian Competition and Consumer Commission has found.
The ACCC found Aussies are finding it tough to shop around and make informed decisions, so they stick to the big four banks’ foreign exchange services – but they’re often the most expensive.
“Shopping around could save Australian consumers hundreds of millions of dollars each year,” ACCC Chair Rod Sims said.
“Consumers and small businesses tend to default to their usual bank to send money overseas, but this may not be the cheapest option. This is another example where consumers may end up paying more for their loyalty.”
The ACCC said there are four key factors to consider when choosing a payment method for travelling overseas:
Acceptance: is the payment method widely accepted in the overseas destination?
Certainty of price: Will you know what the total price is going to be?
Convenience: How easy is it to transport and use?
Security: What happens if it gets lost or stolen?
Still not sure what exactly to do with your money? Yahoo Finance answers your frequently asked questions about using cash overseas.
Should I take cash out before I go overseas?
“You'll be hard-pressed to find an outlet of any description that doesn't accept cash, and in remote places paying with plastic may not be an option,” they said.
But while some cash is good, you probably don’t want all your money in cash, because it could be stolen or get lost.
Choice said while banks usually give competitive exchange rates and fees, you should still shop around.
Should I exchange money at the airport?
This is a big no-no.
If you wait to exchange your cash at the airport, you’ll cop some serious fees.
“Buying $1000 of foreign notes could cost you $80 in fees and margins,” Choice said.
The ACCC’s 2019 research found Aussies who bought US$200 this year could have saved around AU$40 by purchasing from cheaper suppliers not at the airport.
Should I just use my debit card when travelling overseas?
Good news: the ACCC said a debit or credit card is usually the cheapest option for making purchases while overseas, with some credit and debit cards cutting international transaction fees altogether.
Their research found if customers of the big four banks used a debit or credit card without international transaction fees instead of a travel money card, they could save around $13 on a US$200 purchase.
Finder.com.au said Aussies should try and pick cards that charge no overseas ATM fees as well. And, they’ve put together a list of the best debit/credit cards for overseas.
If you use your regular debit/credit card, which does have international transaction fees and ATM fees, the savings are modest.
“Debit or credit cards do not generally provide the same certainty about retail exchange rates as travel money cards and foreign cash,” they said.
“You may not know the retail exchange rate at the time you make a purchase with your debit or credit card, unlike when you load foreign currency onto a travel money card or purchase foreign cash.”
Should I use travellers’ cheques overseas?
While travellers’ cheques might be about as abstract as floppy disks to some Aussies, they actually still exist, but they’re not all that common.
According to Choice, using travellers’ cheques really only makes sense if the nearest ATM or card terminal is far away.
The positives? Unlike cash, travellers’ cheques can be replaced by the provider if lost or stolen. Some foreign exchange providers will even refund the cheque at no extra cost.
Should I use a travel money card overseas?
Often the fees associated with travel money cards make them more expensive than other services, the ACCC said.
If a travel money card holder with one of the big four banks withdrew the equivalent of AUD100 in GBP from an overseas ATM in May this year, and that currency wasn’t loaded on to the card, it would cost them around $3.70, plus a 5.25 per cent currency conversion fee.
The total fees work out to around $8.90, or 9 per cent of the transaction amount.
You can often lock in the exchange rate, so you know what rate you’ll be paying your entire stay.
Do I pay in Australian dollars or the country’s currency?
According to the ACCC, it’s best to pay in the country’s currency to avoid the foreign bank’s conversion fees.
“If an overseas bank processes the transaction and performs the foreign currency conversion, it will usually add a margin or mark-up to the exchange rate to make a profit on the transaction,” they said.
“Also, despite paying in Australian dollars, your card issuer may still charge you an international transaction fee as the transaction occurred overseas.”
Choice also backs this up.
“We suggest you pay in the foreign currency instead of Australian, and let MasterCard or Visa apply their more competitive exchange rates.”
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