In India, customers use banks or payment service providers for sending or receiving money globally. Also, while traveling overseas for holidays, some people spend in foreign currencies or sometimes withdraw money using ATM, credit, or debit cards. In this case, people always pay high fees without knowing. They always end up paying hidden fees for payments.
According to a study requested by a London stock exchange-listed company – Wise, in August 2021, Indian customers paid more than Rs 26.4 crore as foreign exchange fees last year. Rs 9.8 crore out of 26.4 was hidden fees. The study shows that the annual amount Indians lost in hidden fees has grown from Rs 5.8 crore to Rs 9.8 crore between 2016 and 2020.
Rashmi Satpute said that once the rupee changes into a dollar or other international currencies, customers become trapped in a network of hidden high fees. She added that the research reveals a severe lack of transparency in terms of foreign exchange transactions. Therefore, consumers pay for unnecessary transactions that users aren’t aware of. People should be aware that they pay a withdrawal fee to the bank on every withdrawal from ATMs abroad. The cost varies between 1 to 4 percent.
Money transfer service providers and Banks also charge these fees while sending money to and from India. For example, if you want to send money to your family member or friend abroad, you will pay fees.
Ambiguous payment pricing structures
Most people have no idea about the actual costs of sending money elsewhere because of a lack of transparency in fee structures. Often, such fees can be over 6 percent of the value of the transfer.
Two main costs are connected with foreign currency transactions: the exchange rate and the upfront transaction fee. Satpute says that the fee can vary, but it would not always represent the total cost of the transaction. It is because traditional providers and banks add undisclosed fees on the exchange rate.
Need for more transparency?
Experts urge that there is a necessity for greater transparency on hidden fees in foreign exchange transactions. As Satpute says, Banks and foreign exchange brokers can achieve it by eliminating misleading titles, including free and zero percent commission.
Some financial institutions and brokers often announce they have low or no fees but hide extra charges in the frame of a mark-up exchange rate.