Consumer Focus moans to OFT on card charges abroad

5th October 2011  

Consumer Focus, the Government formed ‘Consumer Champion’ has lodged a super-complaint with the Office of Fair Trading (OFT) aimed at reducing the credit card and commission charges we all face when making purchases on plastic or drawing cash when we’re abroad.

In what’s being dubbed the ‘Travel Money super-complaint’ Consumer Focus allege that UK banks and credit card issuers are pocketing a cool £1 billion in charges every year from customers changing money into or back from foreign currency. Consumer Focus has asked the OFT to investigate whether it considers these charges unwarranted or disproportionate.

As part of the super-complaint, Consumer Focus is also calling for an end to cash withdrawal charges on UK transactions, and a simplification of charging structures for using credit and debit cards overseas to make it easier for consumers to compare the charges and deals on offer.

Consumer Focus suggests that consumers are being kept in the dark as to the scale of the costs they face when using their credit cards abroad. It’s usually possible to determine in advance of a trip the theoretical charges for drawing cash or for paying with your credit or debit card overseas by looking on your banks or card issuer’s website.

However, it’s difficult to establish the exact resultant charges when making physical transactions and the consequential costs aren’t normally itemised on consumer’s monthly statements. Charges are levied by what’s called in banking industry jargon ‘exchange rate loading’, so most consumers just see two amounts itemised on their statements; firstly the amount transacted in the foreign currency and secondly the net cost to the them in terms of £ sterling debited to their account. Few financial institutions list the actual cost relating to each transaction, or how the costs actually break down in terms of exchange rates or fees.

A comparison of the overseas charges of a number of banks and card issuers shows that some are charging nearly twice as much as others, an indication profiteering may be creeping in

Institution Credit Cards Institution Debit cards
Foreign exchange surcharge Oversea cash withdrawal fees Foreign exchange surcharge Overseas cash withdrawal fees
Caxton FX None None Nationwide Max 2% 2% + £1
Nationwide 2% (potentially 0) 2% + £1 NatWest /RBS 2% (£2 min-£5 max) 2% (£2 min-£5 max)
Barclays 2.75% 2.5% min £2.50 Santander 2.75% + £1.25 2.75% + £1.25 (min £1.99)
Natwest / RBS 2.75% 3% min £3.00 Halifax / BOS 2.75% + £1.50 2.75% + £1.50
Lloyds TSB 2.95% 3% min £3.00 Barclays 2.99% 2% (min £1.50- max £4.50)
Santander 2.95% 3% min £3.00 HSBC 2.99% 2.99% (min £3)
MBNA 3% 3% Lloyds TSB 2.99% 4.45% (min £2 – max £4.50)



The problem has become so serious that some hotels and retailers in major travel destinations have opted to set up £ sterling credit card merchant accounts enabling their customers to settle their bills with their UK issued card but avoiding the surcharges.

Consumer Focus states that:-

  1. Banks and card issuer’s charges for using credit and debit cards abroad are needlessly complex and confusing, and can vary wildly depending on where you actually change or draw your money
  2. Marketing patter like ‘0% commission’ and ‘free currency conversion’ are deceptive. Exchange rates already include mark-ups and so are not fee-free as the phrase ‘0% commission’ suggests
  3. Charges levied for buying foreign currency with a credit or debit card do not reflect actual costs. A debit card payment costs the financial institution an average of 9p to process but customers fees can be up to £5.00 or more

If Consumer Focus’s super-complaint is instrumental in getting a fairer deal for consumers on travel money it could be one of the only things the organisation is remembered for. It’s currently facing the axe as part of the Governments drive to reduce the number of quangos draining money from the public purse. It’s likely that its activities and functions will be taken over by the Citizens Advice Bureau in spring of 2013.

The Banks were typically sanguine about the news, a spokesperson for the British Bankers Association (BBA) said

“We are disappointed Consumer Focus chose not to engage with the industry before it issued this complaint. The banks will now work with the Office of Fair Trading to scrutinise the points raised.

“Transaction costs abroad are driven by the costs of overseas payment systems, often in countries where free banking does not exist.”

Over the last 2 years Cardchoices has highlighted the increasing surcharges being applied to overseas and foreign exchange transactions, and also outlined ways for consumers to avoid the overseas charges by using alternative products like prepaid credit cards.

We also maintain a comparison of overseas credit cards which minimise or in some cases offer surcharge free spending abroad.


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