Money transfer firms are ripping off customers by making them pay four times over the odds to switch their cash from the UK to an overseas destination, according to experts.
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More than £600 million is wasted each year in transfer fees – most of which the operators are hiding, claims foreign exchange comparison site Monito.
The firm sifted through more than 100,000 pieces of pricing data and concluded UK consumers are charged quadruple the amount they would pay if they took the cheapest option.
And Monito claims providers hide their high charges in complicated fee structures and hidden exchange rate margins.
Consumers in the UK send more than £18 billion a year overseas, according to the World Bank.
More than half the money goes to six countries – India, Nigeria, Pakistan, France, Germany and Poland.
But Monito argues banks are not the only culprits.
The firm accuses online money service PayPal of adding a fee for debit or credit card transfers and charging a higher percentage fee for sending money to another country.
Monito says a considerable amount of money is lost in currency conversion each time consumers convert money between currencies as PayPal takes a hefty margin on the exchange rate.
The cost of a PayPal cross-border personal payment with a currency conversion is at least 2.8% of the transaction amount, including both payment and currency conversion fees. In some cases, this can reach 10%.
François Briod, co-founder and CEO of Monito, explained some of the tricks applied by money transfer services.
“There is a serious issue around the transparency of money transfers and these figures demonstrate this. Banks always tell you their charges if you ask them, but they will generally not be able to tell you the fees charged by intermediary banks handling the transfer, or by the bank receiving the transfer,” he said.
“In some cases, you don’t even know the exchange rate that will be applied. For example, you may be able to see the current exchange rate, but that might not mean it will be the one applied to your transfer.
“There is a real lack of understanding regarding the price consumers are paying to exchange currencies, hiding up to 50% of the total costs of money transfers.”
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