Banks set to scrap debit card currency fee

 

Holidaymakers will no longer be charged for purchasing foreign currency with a debit card in the UK at five major banks, the consumer watchdog announced today.

Lloyds Banking Group, Barclays, Royal Bank of Scotland, Santander and the Co-operative Bank have all agreed with the Office of Fair Trading (OFT) to remove the charges, which are typically between 1.5% and 2% of the purchase.

Nationwide, HSBC and Halifax Bank of Scotland do not charge a debit-card fee for purchasing foreign currency in the UK.

Elsewhere, Britain's banks have agreed to give "clearer, more accessible" information about charges for using cards abroad, while many foreign exchanges have agreed to review marketing practices, particularly their use of "0% commission" deals.

The OFT was asked in September to investigate allegations of complex charging and poor information for travellers following a "super-complaint" by Consumer Focus.

The OFT's report found that travel money providers made £1.1 billion in 2010 from the £32 billion spent by Britons abroad, of which £27 billion was while on holiday and included foreign currency purchased in the UK.

Around 40% of foreign currency purchases in the UK are made using cards rather than cash, while close to 80% of respondents in the OFT survey bought at least some foreign currency before travel.

OFT chief executive John Fingleton said the changes agreed by the banks and foreign exchanges should "drive greater competition in the UK travel money market".

He said: "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."

The OFT found during its short investigation that charges for purchasing foreign currency and using cards overseas can be confusing and "not at all clear" for consumers.

The regulator secured agreement from the UK Cards Association, which represents all major credit, debit and charge card issuers, and the British Bankers Association to improve the quality of information on charges for using cards abroad, on websites, statements and through call centres.

Lloyds, HSBC, Co-operative Bank, Capital One, RBS and NatWest and American Express have agreed to display the actual charges incurred by customers for using cards abroad more clearly on their monthly and annual statements, the OFT added.

Consumer Focus found that some 70% of holidaymakers take foreign cash with them on their trip with one in five using credit or debit cards abroad. The watchdog estimates that British travellers altogether take around £10 billion in cash when they go overseas.

The campaigner previously said it costs banks and credit card providers an average of 9p and 37p respectively to process debit and credit card payments, while charges for buying currency with a card are typically 1.5% to 2% of the amount converted, up to a ceiling of £4.50.

Mike O'Connor, Consumer Focus chief executive, said: "It is particularly welcome that the OFT has worked with the big banks to stop withdrawal fees being charged when people buy currency on their card in the UK. It is only right that this unfair cost, which effectively charges customers for the privilege of taking money out of their own account, is stopped.

"We also want to see an end to deliberately misleading marketing phrases such as 'O% commission', as services are not fee-free. Consumers have a right to know how much they are paying for their transaction and whether there are better options available."

PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003