Thursday, 28 May 2015

Foreign currency exchange - a nice little earner

How much do banks and credit card companies profit from soaking holidaymakers? I have often railed against the iniquities of currency exchange on this site. Scanning my latest credit card purchase list again raised my blood pressure. The amount charged on my bill for two nights at a hotel in France came to just over €584. At the full commercial exchange rate when I checked out this would have worked out at approximately £424. OK, I know travellers never get that rate but stay with me. VISA calculated the bill at 1.378 to the pound , which worked out at just under £436. On top of that my statement showed a £12.66 transaction fee, calculated at 2.99%. That's a total of some £25 more than I would have paid had I been able to buy euros at that day's full exchange rate. There is a less galling outcome than I might have suffered in that it appears that as a result of some administrative glitch the transaction fee wasn't charged. But the principle remains. You may agree with me that it's way too much. (I have excluded dedicated currency exchange companies from this attack  only because it is generally their sole source of revenues - not because they are wholly without fault, notably when it comes to rates offered at airports.) You might also argue that it's the price we have to pay for the sensible political decision to stay out of the Eurozone, which has possibly left us better off. But consider this hypothetical statistic: if UK travellers were charged £25 on each of the estimated 38.5 million holiday visits they made abroad last year the total would have come to some £960 millions.   

2 comments:

davidb said...

what do you think about currency cards, worth it?

Roger Bray said...

Prepaidf cards? I confess I've never done the sums. Moneysupermarket.com offers a good comparison of foreign transaction fees. But you also need to watch the currency exchange rates you get when you load them. Looking at them today I note there's a difference of about 4.3% between those analysed.