Overseas holidays could become cheaper if a consumer watchdog inquiry into exorbitant foreign transaction fees is successful.
The Australian Competition and Consumer Commission will look at “excessive” charges for currency conversions and overseas credit cards use.
Treasurer Josh Frydenberg said millions of Australians were paying too much to the banks and shelling out $2 billion a year in foreign transaction fees.
“We want to stop the rip-off,” Mr Frydenberg said in Sydney.
The ACCC will also look at charges for transferring money overseas and on prepaid travel cards.
A customer of an Australian bank who travels overseas and spends $5000 on their credit card incurs about $140 in foreign exchange transaction fees.
If a customer was to transfer $1000 overseas, it would cost an Australian on average around $80 in fees and exchange rate mark-ups, compared to about $60 for someone in the United States.
“When you look around the world people pay less in the United States, in Europe and the question must be asked why isn’t that the case here in Australia”, Mr Frydenberg said.
The World Bank says Australia is the third most expensive G20 country for consumers and small businesses to send money from.
“We will be examining why major companies in Australia, including the big four banks, seem to be able to consistently charge high prices,” ACCC chair Rod Sims said.
Shadow assistant treasurer Andrew Leigh said it was three years since Labor first highlighted the high cost of foreign money exchanges.
“While Labor welcomes the announcement that the government will adopt Labor’s calls for a fairer system, we fear the ACCC inquiry announced today is too little, too late,” Dr Leigh said.
“Excessive and confusing fees have made it too pricey to transfer money for far too long.”
A report from the ACCC is due to be given to the government by May.
WHAT FEES ARE APPLIED TO:
* Converting money into a foreign currency.
* Transferring money overseas.
* The use of debit and credit cards overseas.
* Using debit or credit cards online to make purchases in a foreign currency.
* Transferring money to a foreign currency on a prepaid travel card.