A new survey has reveals that 49 per cent of Australian SMEs use their credit cards when spending $2000 or more on a single international purchase, despite credit card fees of up to $90 for each purchase of this size.
The survey of 202 independent business owners and decision-makers commissioned by comparison service Money Transfer Comparison found that the three most common payment methods for overseas transactions are credit cards, bank transfers, and transfers from specialist international money transfer platforms. The resport shows that 63 per cent of SMEs automatically make big international purchases with a credit card for the sake of convenience, while 31 per cent say they don’t have enough time to research other payment methods.
In particular, 20 per cent believe that other payment methods would not give worthwhile savings, 19 per cent don’t know of any other payment methods, and 18 per cent think other payment methods seem too complicated.
However, the report notes that major banks charge transfer fees of up to $30 in addition to hefty exchange rate markups averaging 2.5 per cent on common currencies such as USD, NZD and GBP, and even higher on less common currencies. On credit card purchases, Australia’s major banks further impose on card holders currency conversion fees of up to 3.5 per cent.
According to a recent report commissioned by the Australian Competition and Consumer Commission, international money transfers from Australia are high by global standards. Credit card usage is also on the rise, according to a 2022 survey by the Reserve Bank of Australia (RBA), which shows a quarter of Australians favour their credit card in general for all payments.
“There is a wide range of overseas purchases that businesses – particularly retailers and eCommerce traders – can make regularly,” Russell Gous, Money Transfer Comparison spokesperson, commented. “Much of Australia’s goods are sourced internationally, technology and suppliers can be more affordable when sourced overseas, and business travel from Australia has rebounded strongly in the last year.”
“Our survey results speak volumes about the glaring information gap when it comes to making international purchases cost-effectively, and it’s a gap that’s hurting the hip pockets of SMEs,” Gous added, “What almost half of SMEs fail to realise is that specialised transfer providers typically offer far better exchange rates than the big four Australian banks, with their transfer fees often 0.3 to 1.3 per cent depending on the size of the transfer. Additionally, they’re remarkably secure, and they’re easy to set up and use. Online spending is on the rise, and significant savings can be made by eschewing banks for third-party transfer sites.”
When asked if they would automatically use a credit card when making overseas payments of $2000 or more, 51 per cent of small businesses (11-50 employees) and 47 per cent of medium-sized (51-200 employees) businesses have admitted that they’re the most likely to do so. Overwhelmingly, micro-businesses are the least likely to use their credit cards for overseas purchases of over $2000, at 60 per cent compared to 53 per cent of medium-sized businesses and 49 per cent of small businesses.
