Garry Cahill and his wife Shane recently paid a high price for trusting their bank to handle a major foreign exchange transaction. 

The retired couple had sold a pickup truck and caravan in the US that they’d used for an extended road trip across the country. They returned to their home in Townsville, Queensland, with a US bank cheque for US$31,876. 

They deposited it in their Bank of Queensland (BOQ) account on 9 February, when the official RBA exchange rate put the Australian dollar at about 71 US cents. 

At that rate, their US dollars would have been worth about AU$44,895. 

As a rule, though, banks and other foreign exchange services factor a profit margin into official exchange rates, meaning the Cahills would have received perhaps a few hundred dollars less – if the margin were reasonable. 

(On 10 May, the RBA exchange rate was about 70 US cents per Australian dollar. On the same day, the BOQ exchange rate was about 74 US cents per Australian dollar on its travel money service – a margin that stretches the bounds of reasonableness, but wouldn’t be unusual for a bank.)

Final payout off by thousands 

The exchange rate on the day Garry deposited the bank cheque didn’t matter, because it took more than nine weeks to clear. 

When it did, on 14 April, the Australian dollar had climbed to 74 US cents, making the Cahills’ US dollars worth about AU$43,075 at the official rate. 

Much to their surprise – and chagrin – the Cahills ended up with just AU$39,629. 

“Why couldn’t the full amount of that cheque have been credited to our account on the day of the deposit but not made available to us until verified?” Gary asks. “The bank’s excuse was ‘that’s the way it’s always been done’.”

The role of Travelex

But it wasn’t just the timing of the cheque’s clearance – it was also a matter of who processed and applied the exchange rate. 

That turned out not to be BOQ but the foreign exchange company Travelex, which the bank uses for such transactions. This came as news to Garry. 

“The bank official disclosed that, once cleared, BOQ handed the money to Travelex for the foreign exchange,” he says.

“Travelex, a company well known for overcharging customers, then exchanged the US dollars for Australian dollars at an exorbitant rate of one Australian dollar for 80 US cents, thus reducing our estimated AU$44,558.35 down to US$39,629.34. BOQ accepts no responsibility for using such a notorious currency exchange company and now considers the issue finalised.”

Travelex a poor performer

In a ÌÇÐÄVlog review of overseas money transfer services, Travelex was identified as one of the least preferable options.

Yet Travelex’s exchange rates were not nearly as bad as the rate applied to the Cahills’ transaction, relative to the value of the US and Australian dollars at the time. 

Nevertheless, online money transfer services are almost always a better option than traditional banks. A 2019 report by the ACCC found that people who used one of the big four banks to make an international money transfer of US dollars or UK pounds in 2017–18 could have collectively saved about AU$150 million if they’d used one of these services instead. 

Update 27 May 2022: Following the initial publication of this story, Travelex contacted ÌÇÐÄVlog with a request to add comments: 

“Foreign cheques are not widely accepted in Australia, and the process is onerous, time consuming and labour intensive,” a Travelex spokesperson says, adding that the cheque cleared within the normal 55 to 80 day timeframe.

“We take all customer complaints seriously and will support any ongoing investigations about this claim. We are working with BOQ to better understand the issue and any remediation steps that can be taken to improve the customer experience and transparency of the process.” 

Was the Banking Code followed? 

The Banking Code of Practice says, “if you are an individual that is not a business, we will tell you about a transaction service fee immediately before you incur the fee”. 

The Code also says, “We will communicate with you in a timely manner and we will give you information that is useful and clear.” 

According to the Code, banks providing foreign exchange services should give customers exchange rate details for transactions like the Cahills’, or tell customers where to find such details.

‘We were not informed’

But Garry says that he and his wife received no such communication from BOQ during the nine-plus weeks it took the bank cheque to clear. Nor was there any communication regarding the high exchange rate margin applied to the transaction.

“At the initial date of depositing the cheque we were not informed of the fees nor were we advised that the value of the cheque would be that at the date of clearance and not the date we deposited the cheque,” Gary says.

We asked the Australian Banking Association (ABA), the industry body that oversees the Banking Code of Practice, if there are any limits on the margins banks can apply to foreign exchange transactions, or any limits on how long a bank can take to clear a foreign bank cheque. 

An ABA spokesperson told us “the ABA won’t be available to comment on this occasion”.

Update 27 May 2022: Following the initial publication of this story, the Bank of Queensland contacted ÌÇÐÄVlog with a request to add further comments, as follows: 

“BOQ confirms it disclosed all relevant fee, processing time, and exchange rate information to the customer regarding the foreign cheque, in line with the requirements of the Banking Code of Practice. We are not in a position to provide further commentary while the matter is before AFCA.”

Bank of Queensland: ‘We recommend an international money transfer’ 

A BOQ spokesperson explained that cheques of more than AU$10,000 go through a special process at the bank, one that appears not to be in the best interests of its customers. 

“Where the value is more than AU$10,000, the cheque will take at least eight weeks to clear as Travelex negotiates for the funds to be released from the foreign bank,” the spokesperson says. 

“Once this occurs, BOQ credits the funds to the customer’s account minus a small fee. The exchange rate for the cheque is struck at the time Travelex makes the negotiation with the foreign bank, rather than at the time the cheque is presented to BOQ.”

The spokesperson acknowledged that there are better options for customers than depositing foreign cheques of more than AU$10,000 with BOQ. 

“We recommend that where possible, customers request an international money transfer rather than a foreign cheque for the quickest process and to avoid fees.

Case now with the Australian Financial Complaints Authority

That advice comes a little late for the Cahills. 

“We understand the issue about international processes, however this does not excuse the diminution of value of our cheque,” Garry says. 

“At our last meeting with the bank, on April 19, they promised to contact Travelex to reconsider if their exchange rate was excessive. Nothing has been heard from BOQ on this matter since.”

The Cahills have lodged a case with AFCA which is currently being considered.

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A laughable exchange rate, hidden fees, delays and double charges – sound like your last overseas money transfer? 

Banks can and will siphon off hundreds of dollars as your money makes its way to a foreign land. It’s a bit of a racket, really. 

Where did my money go?

Many of us have found that funds can mysteriously shrink while en route to other countries, mainly through a combination of unanticipated fees and miserly exchange rates, especially the latter.

ÌÇÐÄVlog member Trish R, for example, was stung with a $30 sending fee, wore a terrible exchange rate, and then got hit with a $50 receiving fee on the other end of her overseas funds transfer. 

The amount she sent overseas bore only a passing resemblance to the amount that came through on the other end.

That’s because she sent her money through a bank rather than an online money transfer service – never a good idea. (Trish knows better now.)

ÌÇÐÄVlog Tip: Go with an online-based money transfer service when you need to send money overseas or have it sent here. These disrupters have really improved consumer outcomes when it comes to foreign exchange. 

Executing a simulated trade

There are a lot of players in the overseas money transfers game, and there are too many variables at play to pick a best one for every circumstance. 

The main problem if you’re new to the market is that it’s impossible to see the exact deal you’ll get unless you’ve signed up to a service. 

When you’re a member, you’ll see the final deal on offer before you commit to it. 

But services such as OFX, World First, Currency Fair, XE and others will let you execute a simulated trade of Australian currency for another currency using mid-market rates (also known as interbank rates). 

Most make it clear that these are indicative rates only. The rate you’ll actually get if you sign up to the service – the customer rate – will probably not be as favourable, since the services make money by adding a margin to the mid-market rate. 

Indicative rates a good guideline

The rates you see as a non-member are generally only indicators, but they do indicate one thing quite clearly: you’ll get a much better deal through one of these non-bank services than you will through a traditional bank, especially one of the big four (Commonwealth Bank, Westpac, ANZ and NAB). 

A recent review by the Australian Competition and Consumer Commission (ACCC) found that 12 of the 15 major money transfer services are adhering to best practice when it comes to the accuracy of simulated transfers on their websites and fee disclosure prior to a transaction. It’s a marked improvement on the ACCC’s June 2020 assessment of the industry, which found that many services fell short of best practice. 

“The majority of money remitters reviewed by the ACCC are now giving consumers the tools they need to easily compare the total price of international money transfers,” the agency said in mid-August 2021. 

A 2019 ACCC report found that consumers who used one of the big four banks to send international transfers of US dollars or UK pounds in 2017–18 could have collectively saved about A$150 million if they’d used a non-bank transfer service instead.

Which is the best money transfer service?

ÌÇÐÄVlog tracked indicative rates provided by money transfer services as well as the big four banks over five business days using the scenario of sending $10,000 to the US. 

Though the sum of US dollars the recipient would have ended up with on the other end was only an estimate, it made it clear that most money transfer services offer much better deals than the big four banks – up to hundreds of dollars better in some cases.

In our $10,000 test, some of the newer arrivals to the marketplace – OFX, World First, Currency Fair, XE and WISE – did better than longstanding non-bank transfer services such as Travelex, Western Union and Moneygram.

The difference between the best and worst performers among the five was USD$36. 

Many factors at play

Meanwhile, the median difference between these five (OFX, World First, Currency Fair, XE, and WISE) over the five-day test and other non-bank services (Travelex, Western Union, Moneygram) was USD$161. 

Then there’s PayPal, which only beat three of the big four banks. Tip: Avoid PayPal for sending money overseas. 

The small difference between the best and the worst of OFX, World First, Currency Fair, WISE and XE is not necessarily enough to pick a winner among the five based on exchange rates alone, since the functionality of their online trading platforms and customer service are also things to consider. 

Plus, exchange rates change all the time, and a service offering better rates one week may be outdone by another service the following week. 

Among other things, the deal you get will depend on:

• the size of the transaction
• the currency involved
• the exchange rate offered on the day
• how much the sending and receiving banks charge
• whether you’re a regular customer, since some services offer loyalty discounts.

Banks lose by hundreds 

The real story is how much better these five money transfer services did than the three big banks we included: CBA, ANZ, NAB and Westpac. 

The median difference between OFX, World First, Currency Fair, WISE and XE, and the big four banks over the five-day period was $308, with the money transfer services coming out on top. 

Ultimately, which one’s the best will depend on a number of variables.

One is how much the sending and receiving banks will charge for the transfer and how long they’ll take to process it. This is out of the money transfer service’s hands and will likely vary with each combination of transfer service and intermediary bank. 

There’s also variation among the services. Some charge a fee for transfers under a certain amount, and most have a minimum or maximum send amount.

Flat vs percentage-based fees 

Most of the money transfer services we tested charge a flat fee for transfers under a certain amount. 

But others charge fees based on a percentage of the amount transferred, such as Wise.

ÌÇÐÄVlog Tip: Make sure you take fees into account when comparing transfer services. 

Non-bank money transfer services: The basics 

• To open an account, you’ll need to provide identification to verify your identity in line with financial services regulations. 
• Like any other online service, you’ll need a user name and password. 
• Generally, you’ll be wiring funds from your bank to the transfer service and providing it with bank details for the recipient. The transfer service will then wire funds per those details. But there are generally other options for how you send the money to the transfer service and where the service then sends that money.

Looking for the best possible deal? Join more than one service

If you transfer money overseas often and are keen on getting the best rate on every transfer, you could join a number of money transfer services and pit them against each other every time you transfer money. 

You’ll be able to check the rate you’re actually going to get as a registered user before committing to the deal.

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On this page:

• Exchange rates
• Conversion costs
• How to lodge a complaint

Finding the best rate

You’ve probably noticed that the exchange rate announced in the media – called the mid-market, or wholesale, rate – isn’t the same as the one you end up getting when you make a transaction.

A fitting term for the gap between the rate your financial institution pays and the one applied to your overseas purchases or withdrawals (in addition to any fees) is the “cream-off”. It varies according to the type of transaction or payment card in question, as well as which moneychanger you use. If you’ve ever changed money at an airport booth, you know what it means to get creamed.

Why do consumers keep getting the short end of the stick? Because the complexity of the cream-off makes it seem unavoidable. It’s not easy to know how much money these financial services providers are pocketing by way of the foreign exchange process.

Exchange rates

Comparing banks

We compared the exchange rates of the big four banks for the euro (€), pound (£) and US dollar on the same day and found that three – ANZ, Westpac and NAB – had exchange rates that were about 4.5% higher than mid-market rates for cash and travel cards, not including fees. Commonwealth Bank (CBA) transactions were about 5.3% above mid-market rates for cash and travel cards.

Debit card withdrawals overseas

If you withdraw cash overseas using a debit card, the fees and charges make matters even worse. On the day we made our comparison, a withdrawal from a CBA savings account or debit card while overseas would have had you out of pocket by 11% more than the mid-market rate for €200, and about 17% more for €50 once the fees were tacked on.

Airport money-changer

To test the extreme end of the exchange market, we obtained a quote over the phone from a money-changer at Sydney Airport. It would have cost you $86.40 for €50, thanks to their stingy exchange rate and minimum commission of three percent, while the exchange at the mid-market rate would have cost $64.10.

Bank to bank transfers

Transferring small amounts of money bank-to-bank via the CBA offered another extreme example. A €50 transfer would have cost $89.92 – or 40.3% more than the mid-market rate on the day we tested, including fees.

Conversion costs

We used the CBA as an example of the big four banks in general, although the CBA exchange rate was somewhat worse than the others on the day we tested when it came to cash or travel money cards.

Our number-crunching exercise found that, on the days we tested, the big four banks applied different exchange rates depending on the transaction option, and the rates varied widely from the mid-market rate.

Getting to the bottom of which rates, fees and charges will be applied is a tall order for a financial mathematics expert, let alone the average consumer. As we discovered, the average bank customer service rep also seems to be in the dark. The ones we spoke to could not clearly explain the foreign exchange rates applied by their respective institutions. Bank websites can also be misleading. Some provide a currency converter tool, but it may not factor in other fees and charges, which only widen the cream-off gap.

Find 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 offers exchange rates as close as possible to mid-market rates, with minimal extra fees, commissions or charges.

and the 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.

Quick decisions

There is no silver bullet when it comes to finding the best exchange rate – it involves a lot of legwork on the day you decide to make the transaction. Comparing 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 methods for travellers

Some 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 some credit cards, for instance, cost consumers only about three percent more than the mid-market rate, even after you add the fees.

It takes a little effort, but really not that much. Simply check the mid-market rate for the currency in question at XE.com, then go to the website of your credit card provider and find its fee schedule. How wide is the gap between the official exchange rate for that currency and the one your financial services provider applies? Fee schedules for competing credit card issuers are not hard to find. 

The best methods for overseas transfers

For bank-to-bank transfers, (formerly OzForex) was a better alternative to the Commonwealth Bank when we made our comparison. The local foreign exchange service came in only two to three percent higher than mid-market rates.

How to lodge a complaint

If you’re unhappy with what you’ve been charged for overseas transactions, you can lodge a complaint with:

• your credit card provider
• Financial Ombudsman Service (): 1800 931 678 / afca.org.au
• Australian Securities and Investments Commission (): 1300 300 630

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