Expats are was wasting millions of pounds by transferring funds through banks instead of foreign exchange specialists, claims Post Office International Payments.
A survey of British expats showed more than 1.5 million paid an average 3152 to banks in foreign currency exchange fees when they could have paid less elsewhere.
The research also revealed more than a quarter of British expats in Spain had seen the value of their homes drop by at least 25%.
Expats have generally suffered from inflation of an average 8%.
The Post Office survey found that currency exchange fees charged by banks compounded a tough financial outlook for many expats.
In some cases, banks are charging at least £9 to switch £500 overseas – and this can rise to £25, depending on the bank.
Fee-free cash transfers
The survey also showed difficult financial circumstances was encouraging around a third of expats to transfer small sums of money each month, increasing the amount of bank charges they were likely to pay.
These small transfers could rack up extra fees of an average £184, while, fee-free international transfers through the Post Office or foreign currency exchange specialists would cost nothing.
Expats transferring larger sums – typically £5,000 or more – also lost money to banks because they fail to offer enhanced exchange rates on switching larger amounts of cash.
The Post Office claims HSBC and Lloyds TSB hike their rates for these large transfers, adding up to £470 every three months on transferring £5000 into euros.
Besides exchange rate concerns, many expats are suffering from the effects of inflation on their income and savings.
While inflation in Britain has averaged around 2.5%, expats have found the costs of meeting day-to-day bills spiralling to an average 8%, while 40% report they are suffering an inflation rate of 10% or more.
Expats deflated by inflation
In general, many expats feel inflation and falling houses prices makes them feel worse off.
Inflation has knocked back the lifestyle of 80% of expats, said the study, while only 14% say they are unaffected and a quarter is expecting fuel prices to rise even higher.
“Financial confidence is not as high among expats as it is at home,” said a Post Office spokesman. “Especially in Southern Europe, inflation is high and house prices are falling, making things seem worse.
“Many are also paying too much to switch their money, and that’s cash that they could spend on something else.”
One reason why expats in Europe feel less confident about their finances is the UK is at a different point in the economic recovery cycle that Spain, Portugal and Italy.
