Australians don’t understand the cost of sending money overseas
Over a million consumers believe banks send money overseas as a free service.
New research from online peer-to-peer money transfer provider TransferWise reveals just how little Australians understand about the costs involved with sending money abroad. Considering one in three Australians has sent money overseas the level of understanding, or lack thereof, is worrying.
When banks send money from Australia overseas they charge a transaction fee and also a margin on the real exchange rate. This is why you’ll be quoted different exchange rates when you get quotes from several providers - they all charge their own margin.
This margin (or markup) on the exchange rate is not overly transparent, so it can be difficult to know just how much it’s costing you. Previous research revealed Australians are paying a huge $3.1 billion a year on poor exchange rates and overseas card charges.
According to the new research by TransferWise, only one in five Australians (20%) understand that banks charge a transaction fee and a margin on the exchange rate when sending money internationally. And only 28% of those who have actually sent money abroad themselves understand this.
Almost one in five (18%) Australians think there’s just a transaction fee charged, and almost half (47%) have no idea how banks determine a margin on top of the real exchange rate. And the most concerning finding to come from the research: over a million Australians believe the banks send money overseas as a free service.
In August, TransferWise launched a campaign against these fake exchange rates charged by the banks and encouraged Australian consumers to get in touch with their bank to ask what the margin they were applying actually was. When launching the campaign TransferWise co-founder and chairman Taavet Hinrikus said, "Huge hidden charges are taken in the form of the terrible exchange rates, often without the customer realising. These practices aren’t transparent and hide important decision-making information from customers."
In October Australia's biggest bank, CommBank, dropped its international transfer fees by 70%. Its fee for sending less than $1000 abroad was reduced to just $6 down from $22, and amounts over this now attract a $12 fee instead of the previous fee of $22. Just last week we saw ANZ follow suit, dropping its international money transfer fee down to $12 from the previous $18 for amounts under $10,000.
The banks dropping their international transaction fees is all well-and-good, but consumers are still being hit with poor exchange rates. To avoid these exchange rate mark-ups, consumers should do their research and opt for a dedicated online money transfer service instead of relying on their bank.