Brits overpay more than £1billion on foreign currency exchange annually

More than £1billion is unknowingly spent on secret fees and charges by British travellers when exchanging foreign currency, according to a new report by the Travel Money Club and the University of Wolverhampton.

The study revealed that £1.15billion is added to foreign exchange rates in the form of hidden fees, commissions, transaction charges and mark-ups before it reaches the pockets of British holidaymakers.

According to the Office for National Statistics, £66.3billion is spent on foreign currency during visits abroad each year; 75% of this is exchanged in UK banks, bureaux de change, travel agents, supermarkets and Post Offices before departure. But hidden margins, charges and commissions mean that Brits spent £40billion buying the 20 most popular currencies rather than the £38.85billion it would have cost with Travel Money Club.

People face paying as much as £200 extra when exchanging £2,500, with rates varying on different currencies from the same provider by as much as 6.25% and travel agents offering some of the poorest retail rates available.

There is currently no regulation on retail currency providers and the rates they offer, unlike the home energy market which recently introduced guidance for providers and the rates they charge. The lack of transparency means that many currency retailers hide fees and commissions in their rates rather than being open about operating charges.

Research also found that 90% of travellers admit to getting their currency from a regular source, with less consideration for getting the best deal. 85% believe that there is minimal difference in fees and charges between providers. This lack of awareness in charges resulted in almost all (98%) travellers considering convenience among their most important factors when buying foreign currency. Travellers who do shop around spent an average of just 12 minutes comparing conversion rates before purchasing.

In light of the findings, Travel Money Club is lobbying for greater transparency in the pricing of retail foreign exchange to allow those travelling abroad to make a more informed choice about where to buy their travel money and how to benefit from the best rates. Currently foreign exchange rates are packed with stealth charges, making it difficult for travellers to understand which providers offer the best value.

Don Clark, the company's founder, said: “The truth is that foreign exchange is still a wild west when it comes to retail regulation, with no restrictions on what can be charged to consumers and how much can be added in the form of hidden fees and charges. This results in hugely different prices between providers, and even across branches of the same company.

"Leads and lags are also commonplace, with delays in publishing better rates, and the accelerating of poorer rates ahead of market drops, inflating profits for retail currency exchanges – a similar pricing strategy to the one used by petrol stations when oil prices fluctuate.

“We want to lead the way in campaigning for fairness and transparent pricing, so consumers properly understand their options and can make an informed choice. We look forward to the day when all businesses, whether commercial or retail sellers in the foreign exchange sector, follow suit. Following Ofgem’s introduction of regulatory guidance for home energy providers, we encourage the retail travel money and exchange sector to follow suit, bringing transparency to British customers."


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