Paying for something in a foreign currency? Brace yourself for the fees.
A study commissioned by online money transfer company TransferWise and published on Thursday (May 2) has found that the average Singaporean household loses S$1,400 a year to unfavourable exchange rates set by banks and services when they convert money to a foreign currency.
The overall fees paid per household for money transfers annually was estimated at S$2,000.
The study looked at money transfers made by businesses and consumers – which included overseas credit card spending, changing money at a money changer, converting dividends from overseas investments into Singapore dollars, and remittances such as paying school fees to overseas universities (for those studying abroad).
The study also incorporated data from the World Bank, OECD, United Nations, International Monetary Fund, Statistics Singapore, KPMG, and several commercial banks in Singapore.
Annually, Singapore converted S$926 billion into foreign currencies, racking up S$2.8 billion in fees, the report said. Of this, S$2 billion (71 per cent) was due solely to marked-up exchange rates set by banks and money transfer services.
Though consumers’ foreign exchange (FX) transactions comprised just 5 per cent of the total number of transactions, they ended up paying an estimated 43 per cent of the total fees, the report added.
TransferWise claimed that firms charged consumers fees that were 15 times higher than corporate rates.
TransferWise CEO Kristo Kaarmann said that firms got away with these “unfair” rates as consumers were largely unfamiliar with how fees are structured in a foreign exchange transaction, making it hard for them to tell when they are being overcharged.
He added that the majority of people did not know that banks and other money transfer services marked up the exchange rate.