Australians are being ripped off by poor currency exchange rates and fees, an analysis by researcher Capital Economics shows.
The researcher estimates in 2016 Australian holidaymakers and work travellers paid well over $1 billion in fees and poor exchange rates on their currency exchanges.
This figure includes more than $110 million in poor exchange rates and fees for cash exchanged before travelling overseas.
It includes more than $930 million on dud exchange rates applied to card purchases abroad, and almost $170 million in charges for overseas cash withdrawals.
It's not only individuals who are losing out. Small and medium-sized businesses are forgoing almost $150 million a year in poor exchange rates on their exports.
Big banks expensive
The research confirms that the most costly way to buy foreign currency is through the big banks.
"Most banks tell their customers that they only pay a small upfront fee for international payments," says Taavet Hinrikus, the chairman of TransferWise, a money transfer service that sponsored the Capital Economics research.
"But in reality customers pay much more. Huge hidden charges are taken in the form of the terrible exchange rates, often without the customer realising."
And it's not only travellers who are paying the price. Those transferring money overseas to loved ones are also getting a raw deal.
Capital Economics says remittance outflows from Australia totalled $9.8 billion in 2016.
Growth in remittances overseas is booming. World Bank figures show international money transfers from Australians to their relatives and friends overseas is up 26 per cent in the five years to 2015, one of the biggest percentage increases in remittances of any country in the world.
Yet many of these recipients, who include those who send money overseas for their own use, including for investment purposes like buying property, are likely to be getting much less in foreign currencies because of poor exchange rates.
Capital Economics estimates that remitters paid nearly $220 million in poor exchange rates and fees during 2016.
Generally, much better rates and lower fees are available from the major non-bank money transfer services.
The banks have higher overheads than the online currency transfer services, but it also could be that banks are taking advantage of their customers who don't shop around.
Low transfer costs
German-born Dominic Grevsm??hl, 37, who lives in Melbourne, has transferred about $50,000 over the past three years from Europe to Australia.
He works for a company that provides software for online retailers and travels frequently to Britain, where he worked for nine years, and between the Berlin and Melbourne offices of his work.
He avoids using his big bank for the transfers, as there are cheaper online providers.
"I also had concerns that if you transfer frequently with small amounts, then the fees will eat a lot of it," he says.
Dominic started using online provider TransferWise about five years ago when he was living in Europe and has continued to use the service since it opened in Australia in 2015.
He is signed up to TransferWise's "rate alert" and waits until the exchange rate is favourable before transferring the money.
"That's important given that rates can change quickly, especially with what's happening with the pound with Brexit and with changes recently in the Australian dollar," he says.
Bessie Hassan, money expert at comparison site Finder, urges those looking to send money overseas to get online and compare international money transfer providers to minimise fees and get the best rates.
It is not only that big banks, generally, have poor exchange rates, but their fees are also generally higher, she says.
"It can be three times cheaper to transfer money overseas through an online money transfer service compared to a bank as some have next to no fees for recurring customers," Hassan says.
Banks and online money transfer services change their exchange rates frequently, so it's best to make comparison of exchange rates with different providers close together in time, she says.
Consumer group Choice recently named the online providers that have consistently offered the best deals in exchange rates and fees.
As well as TransferWise, Choice also nominates OFX (previously called OzForex), World First and CurrencyFair as being competitive.
What's the actual rate?
Choice warned that although online transfer services and banks provide conversion rate calculators on their websites, it's not always clear if it's the "inter-bank" rate or customer exchange rate that is shown.
The inter-bank rate is the rate the banks pay when they are trading with each other with very large sums of money. It is the true exchange rate, but individuals changing relatively small amounts are never going to get that rate.
Sometimes, online providers and banks will have a calculator that uses the inter-bank rate but shows customer rates on another page, Choice says.
Other services have the customer rate calculator on the home page.
"The point is to make sure you're looking at customer rates, so you can see the rate that will be applied before going through with the transfer," Choice says.
Also, be aware that even if you're using a non-bank money transfer service, the sending and receiving banks - the banks that send money to and receive money from the money transfer service - will charge a fee.