Forget card surcharges, these three invisible fees are costing us more
While the average foreign transaction fee is 3 per cent, it can go as high as 5 per cent. And besides this card-issuer fee, payment networks like Visa, Mastercard, and American Express may also charge their own international transaction fees, which can be up to another 1 per cent.
Card surcharges are rarely levied on online purchases, because of the no-cash-no-card-charge rule, but per $100 purchase, you can still easily forgo $4 for, well, nothing.
Various cards now offer foreign-exchange-fee-free transactions. And a new alternative is to maintain a travel money card at all times for overseas purchases. These are purpose-designed debit cards with favourable exchange rates for money pre-loaded onto them in other currencies.
The cost of that exchange is usually not explicit. Instead, it's built into the conversion rate you get. (Such cards also usually spruik no- or low-cost ATM withdrawals overseas.)
The problem I've found with travel cards, especially when you travel, is if you incorrectly estimate what you'll spend, currency stuck on such a card becomes a conundrum. Do you wait until you next visit that country? Travel card companies pick up a pretty penny if you leave money languishing, in interest.
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But you'll wear a double conversion cost if you instead switch the money again into another currency, maybe Australian dollars. Which brings me to the enormous amount you might not realise you are paying from your superannuation and investments.
3. Investing, whether in or out of super. Hidden trailing commissions on your investments, which came straight out of your fund balance, were banned many years ago now. These were rivers of perennially flowing gold for financial advisers.
But guess what? Asset-based fees were not banned. And if there was an adviser in the mix of any investments, these may lop off the top of your money, too. However, there is another layer of charging we all pay: fund management fees.
These vary significantly depending on the level of management of your investments – or superannuation fund. An average amount would be 1.5 per cent – or $1500 on a $100,000 balance.
Which might be fine … but check, when your super performance for last financial year is released (any day), whether your returns made your fees worth it. If you're paying more for 'highly active' management, are you getting higher returns?
Now, also coming out of your super fund will be insurance premiums, but I generally support these – they're cheap, and the insurance is a great safety net. You'll have a default level of life and total and permanent disability insurance. You may also be able to get limited income protection insurance on request.
Hidden fees are a fact of life in our financial system – and you can bet they're about to be re-hidden when it comes to card purchases. Just never obliviously hand over more than you need.
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