Australians are transferring more money overseas than ever before, but the hidden costs are hefty.
In fact, we're ripping ourselves off by not taking the time to look for the cheapest and most efficient ways to send money overseas, research shows.
Australian consumers and businesses spent $3.9 billion on foreign currency fees in 2016, of which $3.1 billion was in hidden exchange rate markups and card spending charges applied by banks and currency brokers to international transactions. The $3.1 billion loss equates to $167 for every Australian adult or $513 for each family, the independent research commissioned by TransferWise and conducted by Capital Economics found.
The most popular way to transfer money overseas is through a bank (67 per cent) despite the hefty fees involved. More than a million Australians also believe that banks send money overseas as a free service, according the research.
Sydney resident Sophie Sinkinson has been stung as much as $30 or $40 on transfers of around $200.
The 27-year-old communications professional moved to Sydney four years ago, leaving behind in London a personal loan and bank debts that she had to pay off.
"Life in London was expensive, and the loans were helping to support the cost of living over there, plus some travel and moving costs when I moved into a new flat back when I was in London," Sinkinson says.
Once her finances were under control, she transferred money back to the Britain to friends to pay for her share of holidays together.
Sinkinson started shopping around to avoid the high fees, settling on the TransferWise app for international transfers, which cost her $2 or $3 each time on a $200 transfer.
Sinkinson isn't alone. Only one in five Australians understands that when transferring money overseas through a bank, they pay an upfront fee and an exchange rate mark-up. Many think (18 per cent) there is just an upfront fee or have no idea how banks carve out a margin (47 per cent), according to the Capital Economics study.
Australians could be using the most expensive provider for international money transfers and they wouldn't even know it, says Bessie Hassan, money expert at comparison shopping site Finder.
The comparison site's own research found that the average transfer fee among the big four banks ranges from $18 to $22, or an average of around $6 for niche providers.
"It can be a lot more expensive to send funds overseas via a traditional bank than through a speciality provider," Hassan says. "In fact, research by Finder shows it can be three times cheaper to send money overseas through a broker compared with a bank."
Most transfers are sent to family and friends (57 per cent), to pay for purchases (45 per cent), or travel-related expenditure (20 per cent), the Capital Economics survey of 1004 Australian respondents found.
But we're not just being stung on international transfers. Travellers lost an accumulated $442 million on overseas bank card fees and charges last year – equating to $155 per person, per trip.
The research, from ING Australia, also found that 44 per cent surveyed admitted that they had no idea how much their bank or finance provider was charging them. Thailand has the highest ATM fees, having an average ATM fee of $8.47 per withdrawal, followed by the Philippines at $5.69, then the United States at $5.41.
ING Australia has scrapped international ATM fees and also fees on foreign currency transactions such as online purchases for customers who conduct their main banking business with the digital bank. The move comes as banks face increasing pressure to roll back unpopular fees.
Consumers need to look at the actual fees charged, and look at the exchange rate, as both can influence the amount transferred. Many providers will offer $0 fees on the first transfer, so you can save by signing up to a new provider. However, make sure to keep an eye on the exchange rate offered, as providers can make money here too.
"Fees as high as $15 per transfer can kick in after the first transfer, so shop around, especially if you're transferring small amounts."
Meanwhile, Choice recently named the online providers that have consistently offered the best deals in exchange rates and fees, naming TransferWise, OFX (previously called OzForex), World First and CurrencyFair as being competitive.
There's also OrbitRemit, a new entrant in the market that charges a $4 flat fee for all transfers, with a competitive exchange rates and tno recipient fee — something a lot of providers tack on.
The consumer group urges Australians to look for alternatives to the big banks, highlighting the value you can get from online-based transfer services when sending cash overseas.
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