Banks scrap foreign exchange fees

Banks scrap foreign exchange fees 21/12/2011

Five of the UK's biggest banks and other credit card companies have agreed to scrap some of the fees travellers are hit with when buying foreign currency.

The firms have also pledged to display other charges more clearly in their monthly and annual statements.

The move follows pressure from the Office of Fair Trading (OFT), which has been investigating a super complaint from watchdog Consumer Focus.

The fair deal campaigners said it believed consumers spend around £1bn a year on exchanging money.

It added that charges for using debit or credit cards overseas were unnecessarily complex and confusing, adding that phrases such as "0% commission" and "competitive exchange rates", were misleading.

The watchdog pointed out that it costs banks and credit card providers an average of 9p and 37p respectively to process debit and credit card payments.

But charges for buying currency with a card are typically 1.5% to 2% of the amount converted, meaning a holidaymaker trying to convert £500 into euros could be charged up to £30 to do it.

Five companies, including Lloyds, Barclays and RBS, have agreed to scrap the charges.

OFT chief executive John Fingleton said they are "very pleased" that the travel money industry has welcomed the changes.

"Companies should be earning profits by competing to provide the best value products and services, not through charges that are hard for customers to identify or interpret," he said.

He said the new changes should reduce confusion about the charges that apply when buying travel money in the UK or using cards overseas.

"(We) hope they will allow holidaymakers to be far better informed when making choices about how they spend abroad," he said. "This should drive greater competition in the UK travel money market."

Chief Executive of Consumer Focus, Mike O'Connor, told Sky News the move to scrap debit card charges was a "great victory" for the organisation.

He said: "We spend about £27bn when we travel abroad. Now it will cost you less, so the pressure is on...the banks: do it in time for summer."

Mr O'Connor also called for the banks' review on 0% commission to be completed swiftly. He said: "0% commission. That is a con. They already build a commission on exchange rates."

The editorial team.

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