Customers buying travel money in the UK with a debit card will no longer be charged fees ? typically ranging from 1.5%-2% ? at five major UK banks
British banks are swiping �1.1bn a year from holidaymakers, much of it in hidden fees, the Office of Fair Trading (OFT) has revealed.
It has ordered a major overhaul of the way consumers are charged for using debit and credit cards to buy or withdraw foreign currency, and banks have agreed to scrap controversial cash withdrawal fees for using debit cards to buy currency in the UK.
The fee, typically 1.5%-2% of the amount taken out, outraged consumer groups as it was charged to people using debit cards to buy currency in post offices and bureaux de change inside the UK, but not to those who changed their money in cash.
The OFT found that once abroad, holidaymakers are paying as much as 6% to withdraw money from cash machines, and ordered the banks to reveal to consumers the true amount they are charged.
It said: "We found that the cumulative nature of foreign use charges is often not well understood by consumers. A number of card providers do not break out and show the exchange rate fee on statements. Our consumer research suggests that the majority of consumers are unclear about the charges that may apply." Many of the charges were buried in the small print of bank statements, sometimes in separate documents.
Lloyds, HSBC, Co-op, Capital One, RBS/Natwest and American Express have agreed to display the actual charges incurred by customers far more clearly on their monthly and annual statements.
All major card providers will be required to break out and show in pounds and pence the amount of the exchange rate fee on monthly statements, and an annual statement, again in pounds and pence, which will show the total foreign use charges applied over the year.
Holiday money companies have also agreed to disclose the real cost of widely marketed but bogus "0%" commission deals which the OFT said were, in some cases, misleading.
The OFT's action follows a super-complaint brought by Consumer Focus. It welcomed the OFT's review, but said the timetable to bring in changes is too slow.
Mike O'Connor, chief executive of Consumer Focus, said: "The fees charged are opaque and difficult for consumers to calculate. We would like to see the speeding of the timetable for scrapping charges for using debit cards to buy foreign exchange. This should happen as soon as possible, certainly before the summer holiday season in 2012."
In total, British holidaymakers spend �27bn while abroad. Seven out of 10 change money before they go, while one in five use debit or credit cards in foreign ATMs.
Stevan Litobac, technical director at MyTravelMoney.co.uk, said: "Currency providers are abusing the trust customers place in their brands and are giving the false impression that '0% commission' means they make no money from the transaction. What is really happening is that most customers are paying over 10% more than they need to for their travel money, which goes straight into the provider's pocket. It's an opaque and confusing market.
"The worst culprits are airport bureaus, which offer terrible rates, building in margins of up to 15%."
Source: http://www.guardian.co.uk/business/2011/dec/20/foreign-currency-debit-card-charges-scrapped
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