ACCC inquiry to crack down on foreign transaction fees
Australians are charged $2 billion in foreign transaction fees every year.
Whether you’re shopping online with an international merchant or travelling overseas, you’ve probably been stung by foreign transaction fees before. In fact, Australians are charged $2 billion in foreign transaction fees each year. Following a request from the coalition government, the Australian Competition and Consumer Commission (ACCC) will conduct an inquiry into foreign transaction fees in the coming months.
You can be charged foreign transaction fees when you’re converting money into a foreign currency, transferring money overseas and loading money to a foreign currency on a prepaid travel card. If you’re using an Australian debit or credit card to spend or withdraw cash overseas, you can also expect to be hit with a currency conversion fee as high as 3.4%. This also applies when you use your card to shop online with an international business.
To give you an idea of how these fees can add up, if your card charges a 3.4% foreign transaction fee and you spent $5,000 on an overseas holiday, you'll pay $170 worth of fees.
Evidence from the Productivity Commission also suggests these fees are some of the highest in the world, meaning Australians fork out hundreds of dollars more than in other countries per year. According to the World Bank Annual Remittance Data from 2017, sending money from Australia incurred an average fee of 8.84%. This is much higher than the global average of 7.14%. If you transferred $1,000 overseas, it would cost $80 in fees and exchange rate mark-ups on average. The same transaction would only cost $60 for someone in the US, meaning Aussies are paying 30% more for the same service.
Many Australians are unaware of these costs as well. According to research from TransferWise, 80% of Aussies don't understand the true cost of sending money abroad, including the up-front fee quoted by their bank or money transfer provider as well as the excessive exchange rate mark-up.
How to avoid foreign transaction fees when paying on plastic
The ACCC will present its report to the government early next year and it may lead to a reform that could result in lower foreign transaction fees. If you want to avoid these costs altogether in the mean time, there are credit cards and debit cards on the market that charge no foreign transaction fees.
If you’re looking for a credit card, the 28 Degrees Platinum Mastercard, ANZ Rewards Travel Adventures Card and a handful of Bankwest credit cards boast no foreign transaction fees. Some of these no foreign transaction fee credit cards charge annual fees, so make sure to factor this into your comparison.
If you prefer to spend with a debit card, the ING Orange Everyday, HSBC Everyday Global and NAB Classic Banking with Platinum Visa Debit Card accounts all waive foreign transaction fees. You can compare more bank accounts with 0% foreign transaction fees on finder.
If you’re travelling overseas, you could also consider using a prepaid travel card. You can top up these cards with Australian dollars, transfer the money into one of the supported international currencies and spend overseas without incurring any currency conversion fees.
Although we may enjoy lower foreign transaction fees in the future, make sure to compare these costs the next time you shop online or travel overseas.
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