According to the Office for National Statistics, £66.3 billion is spent on foreign currency during visits abroad each year; 75 per cent of this is exchanged in UK banks, bureaux de change, travel agents, supermarkets and Post Offices before departure. But, blinded by an abundance of rate options and hidden charges, British travellers are losing a sizeable chunk of this hard-earned holiday cash to the currency exchange players. Founder of currency comparison aggregator and ‘Skyscanner’ of the money transfer world, Find.Exchange, Ricky Lee sheds some much-needed light on currency exchange’s costly blind spots and how to avoid them
Blind spots in the currency exchange process are leaving travellers wide open to surprises, and most of them are not of the positive sort. Research by Post Office Travel Money showed that two thirds of Brits claimed they felt ‘ripped off’ by costs incurred abroad, which included being faced by poor exchange rates.
While the onus of checking the small print lies at the foot of the consumer, the barely navigable task of cutting through the confusing jargon layers of information is a deterrent for many. And as the growing trend to overspend on holiday continues to spiral upwards – with consumers swept along by the wave of spontaneity – checking rates is often the last thing on their mind.
Without fingertip access to clear and transparent information, in as close to real-time as possible, customers simply can’t and won’t make effective decisions around managing their money exchanges, which consequently leaves them wide open to risk.
To protect consumers as far as possible, it’s high time that currency exchange professionals re-thought their customer experience journeys, and took strides to put the user first. Integrating blockchain technology into an existing model is one innovative way to eradicate the blind spots of currency exchange, making the transaction process easier, cheaper, safer and faster. But for consumers to appreciate the difference technology like this can make, they first need to know exactly what they have been blind-sided by…
In the last five years, the number of companies transferring money abroad has grown from 35 to 112, and that’s just in the online space. Transferwise was one of the first to sound the alarm, shocking people into realising just how much their banks were ripping them off.
TransferGo joined the scene more recently, claiming to be one of the fastest and cheapest options for transferring money broad. Since then, there has been a dramatic increase in the number of ‘neobanks’ and startups offering cash services for foreign exchange, meaning that now, more than ever, people just can’t determine who is offering the best deals.
Overcoming withdrawal symptoms
Exchanging currency is a costly process that is plagued with high fees and hidden costs: the ATM being one of the main offenders.
The concept of a ‘cashless’ holiday is on the rise, but our quickness to overspend means we can’t always resist the hole in the wall temptation. But withdrawing cash from an ATM can cost. The rates might be better than a local exchange counter, but many ATMs charge fees – local bank transaction fees can take from 2-6% of your withdrawal.
In addition to a withdrawal fee, you’ll also likely pay a Foreign Exchange conversion fee, and let’s not forget the Foreign Transaction charge too. That once seemingly favourable rate starts to lose its shine by the time you add on the extra charges, cancelling out any advantage you thought you had.
If you have to use an ATM card, check to see which networks you’re linked to and use an international ATM that accepts them – but readjust your budget along the way so it tells the true story.
Carrying a credit card is of course more secure than carrying cash, and some that are specifically designed for use overseas don’t even add on extra charges. Better still is the pre-paid travel card, which doesn’t charge as much as credit card transactions, though there will still be a fee for loading your card with money.
The last minute trap
Any money exchange that is left to the last minute, the weekend or the airport, is going to cost – it’s not so much of a blind spot as an oversight.
What many may not realise is that the markets shut down for the weekend, so you could be left with an old and unfavourable rate. Weekend city breakers should keep this front of mind and make sure they work out their monies somewhere between Monday and Friday.Speaking of unfavourable rates… airport exchange bureaus may seem like the quickest, most convenient way to get your holiday money exchanged, but the rates are usually dismal. No matter how much you’re exchanging, the waste can be significant – think of those extra little luxuries you could be missing out on, from ice creams at the beach to the hire of a car. Ignore this blind spot and you and your family could be missing out.
The need for speed
Currency comparison sites are not a new revelation, but the problem with many existing sites is that they are loaded with text or don’t show users the relevant information quickly enough. Choosing the wrong comparison site that provides outdated rates could cost you dearly.
If you do use a comparison site, be sure it can help you compare and save based on your own personal needs, from best prices to fastest speeds and payment methods. It should also be able to deliver up-to-the-minute information on the latest rate changes and allow you to set alerts that will notify you of optimum times to exchange.
Finding a bureau when you’re abroad is a tough game in itself, but finding a reliable one that has respectable rates pushes the stakes to a whole new level. And while it’s tempting to keep your toes in the sand for that bit longer, it could cost you the equivalent of a fine-dining experience or scuba trip of a lifetime.
The good news is that there has been some important innovation in this space – platforms like Find.Exchange do all the hard work of locating the best (and nearest), giving you the power of choice, and the luxury of time.
Get the balance right
The best way to avoid excessive currency exchange related fees is to purchase those high cost items, in GBP, in advance – i.e. hotel, car rental and flights. Once abroad, flip the strategy and pay in the local currency for smaller expenses, such as eating out and purchasing souvenirs. Paying in GBP will likely incur a high fee.
Summary of top tips to avoid the currency exchange blind spots
- Shop around, compare the rates, and let the technology do the leg work for you
- Book what you can in advance to secure the best deal, and use local currency while abroad for small amounts
- Avoid ATMs, airports and exchanging your travel money last minute
- Set alerts to track the best rates for you
- Always check the total price, not just the rate as this will include additional fees
- Consider using pre-paid travel cards