Banks are like any business and will charge what a competitive market will bear for their services. They are there to make money for their shareholders, and a nasty person might unfairly suggest the smiling staff and community-spirited nods are merely to show they have heart.
The big boys of the financial world know that these days the convenience of plastic is everything, as much in the world of travel as anywhere. Travellers' cheques may still be available (ask someone under 30 exactly what they are and you'll get a puzzled look), but debit and credit cards are what we rely on, with a little hard cash to back them up.
We grin and bear the cost of using credit cards overseas (expect a 2.1 per cent loading once the card company and your bank have had their fill, not to mention the buried currency gains involved) because, short of setting up overseas accounts and using agencies to transfer funds, it's hard to avoid dishing out "convenience money" to the banks.
But, as our survey showed last week, the small forex operators - assuming you live in a town or city big enough to accommodate them - will give the best deal if you're prepared to go out of your way for a hard-currency deal.
The banks get comfort from the fact that if you hold accounts with them, you will probably buy your holiday folding stuff at their window - through ignorance of other options or, more likely, sheer convenience.
Chances are you may not even look at the rates: you'll ask for $500 or $1000 in Australian currency, say, and won't quibble at what they give you. But what's that about commission?
Bank commission on sales of foreign exchange is standard around the world (in New Zealand the standard extra charge is around 1 per cent, with hefty disincentives on top for small amounts) and is accepted with little challenge from customers because, for most of us, it is not a day-in, day-out event.
Yet most banks will buy your overseas currency commission-free.
On the surface, it all seems rather murky - a device to camouflage the true cost of foreign exchange and keep earnings high, cynics might suggest.
Banks buy foreign currencies at a certain price and then sell them to customers at a profit. No problems with that - it's no different than giving us 7.5 per cent for our money and then loaning it out at 9.5 per cent. But why the commission loading on top for foreign exchange? Isn't it a bit like a supermarket hammering you at the checkout with an extra 1 per cent to help cover their administrative costs?
The currency commissions are even less palatable if you want small change.
If, say, you need $100 in Australian dollars to pay for that airport cab (or want a £20 pound note to send to your daughter in London), you will be stung $10 by the BNZ and $12 by the ANZ (and $5 to $7 by the rest), presumably because the business isn't worth the hassle.
In such a case, that's an additional margin of between 5 and 12 per cent over and above the profit achieved by the banks between buy and sell rates. Clued-up travellers will be smart enough to go down the road to a small operator - where they'll avoid the commission and probably get a better rate as well. Why can't banks absorb the commission into their advertised rates, widening the gap between buy and sell rates?
The banks offer a range of explanations, and we've used the BNZ and Westpac as representative of the industry. To start with, says a BNZ spokesman, they are net sellers of foreign exchange (in other words, they sell more than they buy over the counter), which means they need to buy foreign cash from overseas - and there's a cost in that. As well, there are insurance, freight and interest costs.
The BNZ says it quotes one "sell rate" for various products (such as telegraphic transfers, international drafts or travellers cheques) and the additional fee reflects the cost of providing that particular service.
Westpac says: "Banks offer full service foreign exchange facilities vs a single service such as only the sale or purchase of foreign currency in cash form. We have one set of published rates which apply to the various services including foreign cash, travellers' cheques and other instruments such as telegraphic transfers and drafts.
"These various products have different cost structures which is why it would not be appropriate for us to maintain different exchange rates. Nor do we believe it would be as transparent. Costs vary depending on the product, but the exchange rate is the exchange rate. We currently sell/buy cash in all our branches across the country, and the costs of holding cash and ensuring secure transportation to meet demand across the branch network is reasonably high. The commission we charge is to cover these costs."
So it's a complex area, but ultra cynics might be excused for wondering if one reason for separate commissions isn't to avoid making banks look expensive, as well as actually being expensive for shoppers of foreign cash.
In many parts of the country, banks have a captive audience and control the petty cash foreign exchange travel market. But alongside the new breed of hole-in-the-wall traders in the cities, their rates would look unattractive if they wanted to maintain margins.
Competition, though, is a great thing. The more business that shifts over time to the commission-free currency operators, the greater the pressure on banks to rethink their fee structures. In the meantime, shrewd travellers prepared to sacrifice convenience will do better by walking past their banks.
- Bruce Morris