02.Find the right rate
What's the real rate?
In the slippery world of foreign exchange, the banks make it too hard to work out the cost of a transaction in Australian dollars and figure out the exchange rate you’ll end up paying.
One straightforward alternative for consumers is to choose a financial product or service that offer exchange rates as close as possible to mid-market rates, with minimal extra fees, commissions or charges.
XE.com and the RBA are two well-established sources that publish mid-market rates against which you can measure the rates on offer, but always be sure to check for fees as well.
James Dimond’s experience illustrates the foreign exchange confusion faced by many consumers. “I had to book accommodation in Quebec City for a trip in July,” he tells CHOICE.
“I have an everyday ANZ Visa debit card that I use in Australia and an ANZ Travel Card that I have previously used overseas. My question to ANZ was simple: which card would be cheaper for me to use? The customer service representative kept implying it was the travel card, as I would avoid the currency conversion charge.
“If I used the Visa debit card, I would pay a currency conversion fee of three per cent, but that transaction is processed according to Visa’s everyday consumer exchange rates. On the day I checked, $1 bought me $1.008 Canadian dollars ($C). Therefore, my $C1397.42 purchase on my Visa debit card will cost me $1427.92 in Australian dollars.
“If I had processed the same transaction on my travel card, I would have avoided the currency conversion fee, but the transaction would be processed at a currency conversion rate that applies to the travel card, which is different from the Visa rate. When I checked, ANZ confirmed that $1 would buy me $C0.9507 using the travel card. So, while I would have avoided the three per cent currency conversion fee, I would have been screwed to the tune of five per cent by ANZ on the currency conversion rate. The cost of my $C1397.42 purchase on the travel card would have been $1469.88 – $42 more than on my everyday debit card. That’s a scam.”
Keep the cream
Determining the cream-off factor for a range of currencies using every financial product or service available in Australia is only useful on the day it is done due to the constantly changing rates.
The best option Boyle found on 24 April 2012 was GE Money’s 28 Degrees MasterCard – a recent CHOICE Award winner for Best Travel Money Card. It applies the MasterCard exchange rate with no fees or charges, and can be used as a travel card with pre-loaded currency or a traditional credit card.
Other payment options take a healthy cut but don’t cream off nearly as much as some travel money cards or foreign exchange booths at airports. Foreign currency transactions and cash withdrawals using a CBA MasterCard, for instance, cost consumers only about three per cent more than the mid-market rate, even after you add the fees.
For bank-to-bank transfers, OzForex was a better alternative than the CBA. The local foreign exchange service came in only two to three per cent higher than mid-market rates, although the transfer minimum is $2000.