Getting hold of your holiday money can be a hassle – an expensive one too.
You know the holiday money drill. Rushing to buy currency and paying eye-watering rates. Carrying all that cash around. Struggling to top up your prepaid card (after being declined when paying at a restaurant). Leaving cash on your prepaid card which you’ll never get back. Or opening a new bank account just for travel, topping it up, and managing yet another balance. Getting home from your holiday and finding unexpected charges on your bank statement. Does any of this sound familiar?
That’s how holiday money was before we created Currensea – inconvenient, confusing, expensive.
To understand the simplicity of the Currensea solution, it’s useful to start with some basics around bank charges and exchange rates.
Tourists lose out to bank fees and charges every time they go abroad. Using the usual bank debit or credit card abroad typically attracts non-sterling transaction fees, foreign currency purchase fees, and fees for cash withdrawals.
A non-sterling transaction fee for debit cards varies between 2.75% and 3%. On top of that, banks often apply a flat fee between £0.50 and £1.50 for each debit card purchase. Cash withdrawals attract an additional foreign cash fee of 1.5% to 2% or a flat fee of up to £1.50 plus whatever the local ATM provider might charge.
Even some of the so-called fee-free cards have strings attached. For example, their free spend may be limited to a certain amount, or only apply at certain times (such as weekdays only). Credit card cash withdrawals abroad may affect your credit rating and hit you with interest on that withdrawal from day 1.
The fees vary a lot and are often hidden among the terms and conditions. So you would need to do some very detailed research to find out how much you’re actually paying in charges on every trip.
Exchange rates, while on the face of it pretty simple, are actually a lot more complex than meets the eye.
Banks use interbank exchange rates to buy and sell currencies amongst themselves. This is a wholesale market for currency, which up until recently only banks could use. Interbank rates are the best exchange rates you can get and they can change hundreds of thousands of times per day. Unfortunately, the benefits of this system are rarely passed on to consumers.
UK banks issuing debit or credit cards are obliged to use card scheme rates. The vast majority of high street bank debit cards are Visa based, so use Visa rates. A couple of facts about these rates:
- Visa set their rates once per day. These can be found here. The card systems operate a daily batch process based on this rate, so the rate itself has to be set at a level which protects them against the interbank movement throughout the day. In practice, this means a premium charge above interbank.
- The difference between the daily Visa benchmark rate and the average interbank rate (where the average is defined as the mean of the high and low rates for the day) from August to November 2019, was 0.48%. So a “no fee” bank card, would, in fact, include a charge of 0.48% for the consumer.
- There is also a lag between a purchase and an accurate transaction amount on a statement. The amounts in transaction notifications are just indicative of the actual amount which will be charged. So as an example, a transaction made abroad on Monday may only have its rate set on Wednesday’s benchmark price.
The Currensea approach
Currensea applies a flat markup of 0.50% above wholesale rates. It doesn’t charge anything extra. The price is confirmed immediately, so the price that pops up in your email alert is the final price.
We support all currencies. To start with, we’re using the interbank rate for the 3 most popular currencies including – EUR and USD. We’ll be adding more currencies to our interbank list in the coming months based on customer demand. All other rates will be based on the Mastercard rates.
This structure allows us to give you average savings of 85% on your holiday money vs high street banks, depending on who you bank with.
Until now, the options for achieving pricing like this involved a lot of hassle, a lot of faffing around and a lot of avoiding extras buried in small print. Currensea has changed all that by providing a debit card with simple and transparent pricing, and convenience of connecting directly to your high street bank account. So you have the convenience of your bank, just without the charges, anywhere in the world.
Get your Currensea card to start saving on charges, and we’ll plant 2 trees!