Banks to scrap some currency fees
Banks and credit companies have agreed to scrap some fees for holidaymakers buying foreign currency, following pressure from the Office of Fair Trading (OFT).
From next year, five high street banks (Barclays, Co-operative Bank, Lloyds/HBOS, RBS/NatWest and Santander) will scrap their 1.5 to 2% charges for customers using their debit cards to purchase foreign currency in the UK.
Several credit card providers, including Lloyds, Capital One and American Express, have also agreed to display the charges for using cards abroad more clearly on their monthly and annual statements from 2013.
The move comes after a super complaint from Consumer Focus in September arguing that customers were paying over the odds for foreign currency because of confusing and misleading information.
The complaint stated that companies make £1 billion from travel money charges each year and found that the cost of converting £500 into euros can vary between £10 and £30 depending on the company used.
John Fingleton, OFT chief executive, says: "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.
"We are very pleased that the travel money industry has agreed, following a OFT short investigation, to make these significant voluntary changes. We believe they will reduce confusion about the charges that apply when buying travel money in the UK or using cards overseas, and hope they will allow holidaymakers to be far better informed when making choices about how they spend abroad. This should drive greater competition in the UK travel money market."
A complaint made in the UK by a government-approved watchdog or consumer organisation on behalf of consumers which is then fast-tracked by the Office of Fair Trading (OFT). For a super complaint to be valid, it has to be about a “market feature, or combination of features, such as the structure of a market or the conduct of those operating within it, that is or appears to be significantly harming the interests of consumers”. In March 2011, the OFT received a super complaint from consumer watchdog Which? asking the regulator to investigate excessive surcharges imposed by issuers of credit and debit cards.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.