23 Sep Taken for a Money Ride
Taken for a Money Ride
How hidden costs & charges are used to fleece customers
In many business sectors it is common practice to use hidden costs or charges to make customers pay more than what they think they are paying.
In this brief article we will look at two examples of how customers wind up paying much more than what they expected.
Money Transfers/Foreign Exchange
Suppose you’re a Canadian who is looking to wire the Canadian dollar equivalent of a foreign currency. You will likely pay more than what the financial institution tells you you’re paying.
For example, if you want to wire $10,000 USD. You have an account in Canadian dollars so you have to buy US dollars. The spot market foreign exchange rate may be $1 CAD:$0.83 USD, but your financial institution is offering $1 CAD:$0.81 USD.
Two cents on the dollar may seem like a trivial amount, but multiply that by 10,000 and you wind up paying $200 USD or about $250+ CAD, which will come on top of any handling or transmission charge your financial institution may demand for the transmission.
And yes, there are better, more cost effective alternatives.
Gold & Precious Metals
For those of you who buy gold and other precious metals, you know that there are bid and ask prices for an ounce of a precious metal and that dealers add an extra charge above or below spot depending on whether they are buying or selling.
There are other factors in play.
If you are a jeweller, you will get a better deal than if you are not.
If you try to sell a gold bar that is stamped by a company that is either out of business or has been bought by another company, you will likely be offered a lower price than if you had another brand.
Gold is gold you may say. Not to a gold retailer.
Before buying gold bars or rounds, find out what brands (Canadian Mint, Scotiabank) the gold retailer considers the best brands
Always be aware of hidden costs, especially when dealing with currency or precious metals. Hunt for the best deal. As a consumer you may never be able to escape these costs, but you should consider ways to reduce the pain as much as possible.
© Enrico Codogno 23 September 2017
Enrico Codogno, Principal Consultant, Customer Foresight