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chrisMLU Aug 18th, 2003 07:36 PM

Exchange / Credit Card Fee

Got back from Banff / Jasper on 8/11. Had a great time, smokey at times...made us want to go back to see what it is REALLY like.

Anyway...just got my credit card statement in the mail. Chase Mastercard. I know this has been discussed on the forum before (I found some old Bob Brown posts), but to ease my mind...

...I consistently got an exchange rate of 1.39 CDN$ to 1 $US, on purchases. (I never got cash from an ATM using my credit card) Which, I believe is a good rate, correct?? But, then Chase charged the 2% transaction fee, which I understand is standard practice? there a credit card company that charges a lower transaction fee OR none whatsoever?? If one exists, do they make it up by giving you a worse exchange rate?

Thanks for any info...

djkbooks Aug 18th, 2003 09:01 PM

That 2% "currency conversion fee" is "standard practice" with SOME credit card providers.

I always phone mine before leaving home. Each and every time.

When this all got started a few years ago, someone on this forum encouraged everyone to phone their credit card providers and inquire as to whether they had implemented this fee. If the answer was yes, it was recommended that we inform them that we would use another card or travelers checks, but NOT that card when visiting places with other than US currency, and to follow that up with a letter.

Must have worked. Capital One used to impose that fee, but several months later they weren't.

So far as I know, they do all use the "interbank" rate, with a 1% reduction, which has been in place forever. As of today $1.39 is the interbank rate.

I've heard you've got to keep an eye on your debit card as well. Apparently Wells Fargo, for one, assesses the pesky "currency conversion fee" on their debit card transactions.

maryann Aug 19th, 2003 03:42 AM

Yes, there is a difference. I called my CC companies and found that there can be a big spread.

I will use one in US and another in Canada.

Gizmogirl Aug 19th, 2003 03:56 AM

Thanks for this - I wasn't aware of it and have just phoned my credit card company - Barclaycard - to discover they charge 2.75% - they do it through a reduced exchange rate.

bob_brown Aug 19th, 2003 03:42 PM

Hi Chris. If you got the rate you said you did, it is very close to the bank wholesale rate of currency exchange. Nobody scalped your account. I don't think that for small amounts of exchange you could have done any better.

I was in Canada recently for 2 weeks and used my credit card and my ATM card while I was there. I checked the rates, again, and I think that my rate was like yours -- very near the wholesale bank rate. There was definitely no 2% skim off the top.

As near as I can figure, the charges I made on my MBNA Visa credit card were converted to US dollars at the bank wholesale rate of exchange plus the 1% that Visa has always tacked on. Master Charge,I understand does the same thing.

Some of the banks that issue credit cards also add on 2% more for essentially no value added. That is to say, they don't do a thing for their 2% add-on, except add it on. As near as I can tell, MBNA does not add an extra charge, nor does it play games with the exchange rate.

I am hedging a little on my statement as you can see because of one key fact. I have never been successful in finding out exactly how the exchange rate for a specific transactions is chosen from the daily stream of rates.

As you probably know, the currency exchange rate changes constantly all day long just like the Dow Jones Industrial Average. I once wrote Master Card and asked them, "Which rate out of the daily stream does Master Card use to convert foreign currency transactions to US Dollars." The response from MC bluntly said, in effect, "You might as well shut up because we will not tell you." Visa gave me several variations on a theme of "Nie sollst du mich befragen." in response to my repeated inquiries before finally telling me "Go away and quit bothering us." (The German is from the opera Lohengrin -- when Lohengrin tells Elsa never to ask him who he is.)

So I never could find out Visa or MC determined the exchange rate used to convert a specific transaction from one currency to the other. Visa was at least devious and polite; MC did not mince words.

At any rate I do NOT think you got "took".

chrisMLU Aug 19th, 2003 07:49 PM

Thanks for all the info.

I don't feel that I got "took" now either. But I am now more aware of my options. I will definately call my credit card prior to leaving the country again, and see if I can persuade them to "waive" the 2% fee. Between now and then, I may look for another card from another bank; maybe MBNA.

I know we are not talking about a huge sum of money (in my case, this trip, about $40). It is the principle behind it all.


bob_brown Aug 19th, 2003 08:39 PM

Hi Chris. I got my MBNA card through AAA. Of course, I pay for that membership and one can argue I am paying more there than would I pay otherwise. However, the road service once was handy for my wife when she was stranded with a flat tire.

You can go directly to MBNA's website and get some details. I understand that other banks do not charge either.

Under the circumstances, I think you "beat the system" about as much as it can be beaten. Which is to say you lost less!!

Sam_Salmon Aug 19th, 2003 08:54 PM

Thanks for the info everyone-I'd heard of CC companies in the USA who trafficked in suspect charges as described.

It's good to know that as a Canadian holder of both MC & Visa I'm never charged anything over the wholesale rate of any currency I do business in-not to date anyway.

djkbooks Aug 20th, 2003 11:07 AM

You can have the exchange rates e-mailed to you daily.

Then you can check the transactions on your credit card statement with the exchange rate for that date (the date it's posted, not the date on your receipt).

If there's no currency conversion fee, your transaction should be equal to about 99% of the exchange rate.

Note that some credit card providers with the pesky currency conversion fee itemize same; others do not.

bob_brown Aug 20th, 2003 07:40 PM

I fail to see an advantage gained by having exchange rates emailed. You still don't know which rate was used to convert your transactions. The rates change all day long, as I pointed out above. How do you isolate that one rate used to convert your transactions if it not included with your statement?
Was it the opening quote, the noon quote, the average quote, the closing quote, an exponentially smoothed quote, the median quote for the daily stream, a true average based on the summation of multiple data points gathered during the day, or the (high+lo)/2?

During any trading day the rates vary continually. For example, the opening quote today for the Canadian $ was .7140, but during the day the rate dropped to .7109 before rising near the close. The euro was just about as tight, varying from .8975 to .90155 about 9 PM. If you are trying to pinpoint exact fees, it shows that the fluctuation is continual. For most of us, one dip stick type look on the posting day is sufficient to get within a couple of tenths of a percent.

On my recent Visa bill, all I got was the amount in US dollars. The statement did not even tell me the original Canadian amount. I saved my receipts and could compare. But there was no exchange rate data included. None at all. (I at least got a helpful message that Herz was a car rental company. I often wondered what it did.)

Now, after dividing out the transaction I had a quasi exchange rate. But I have no idea about the exchange rate for the exact point in time the transaction was converted because most statements do not include the time of transaction. Without that information the exact rate is unknowable because neither Visa nor Master Card will say.

The only thing I have ever been able to conclude with confidence is that the base rate used to make the conversions was between the the high and low for the posting day. I can use the average rate, add 1%, and come with in few tenths of a cent. That is good enough as far as I am concerned, and I quit fiddling with exact transactions years ago.

djkbooks Aug 20th, 2003 08:50 PM

Jeepers, Bob, it's not really all that difficult!

I'm just guessing here that some sort of "daily rate" is used when recording transactions to your account. That the rate "fluctuates" all during the day (less than 1% per your example) is hardly significant in the overall.

I, personally, check, just for jokes, along with my credit card transactions, my ATM withdrawals, just to see.

Anything at, or less than, about 1% is of no concern to me, anyway. It's the 2-3% or more (to wit: American Express and Wells Fargo, just to name one or two...) buried, and not dislosed, fee/charges, that are unacceptable, to me anyway.

But, when you phone your credit card providers, you may receive all sorts of less than accurate responses.

As for those "membership" or "annual" fees, you can get them WAIVED. I learned this from my boss, who never, ever, even carries a balance on any of his accounts. You tell them, "waive the fees or I'll cancel and go elsewhere" and they waive the fees.

Same goes for your ATM card and those "foreign transaction" fees. You know - where the bank at the ATM has a fee and yours does too! When my statement arrives, I go to the branch and request that they be removed from my account on the basis that they advertise that you have "instant access to cash anywhere in the world" with no mention whatsoever for any fees involved with same, and my account is credited immediately.

As someone above mentioned, it wasn't the $40 but the principle. $40 is a very nice lunch or dinner for me - NO WAY I'm gonna let that line their coffer!

You know, a AAA membership is one thing, but paying an annual fee for their "endorsed" credit card is another, when you could just as well qualify for one with the same provider, perhaps with a lower or NO annual fee and/or reduced interest rate, if you carry a balance.

If you do carry a balance, which I have previously, call them up and tell them you're gonna pay it off immediately and cancel your account, whereupon they will immediately offer all sorts of other "plans" for your account. Actually, none of those are superior to obtaining a new account elsewhere these days (they're all in line for your business!) if you have good credit.

MBNA is among the best out there, but you've gotta work your own best deal with them.

FromAtlanta Aug 21st, 2003 07:47 AM

It is kind of funny to me that someone rather use Travelers Checks rather than pay a 2% fee. Travelers Checks are not free. I have purchased them from several places in the past, and they were never sold at face value. You always end up paying at least 2%. (and I have since learned that they are not worth it!!)

It is very good advice to call your credit card company (or bank if you use a check/debit card) before you go.

I just wanted to add my 2cents. :)

MD Aug 27th, 2003 06:41 PM (Globe and Mail newspaper, Toronto) on the lower right side will list how much each dollar buys of the other.

I agree, the 1% fluctuation in a day is irrelevant. When I saw the currency (cash) traders in big European cities, the spread is 10% between buy and sell - so they gotta be dinging you 5% or more. Similarly, the cash exchange at my bank has a 5% spread.

Credit and debit are usually close to the going rate for Canadian banks, since they don't have to have a foreign currency inventory for that, and they make plenty in regular account service fees anyway. I've never seen a fee on my credit card bill.

ATM charges - just the transaction fees for the ATM network. Take out one large sum, not $20 at a time. Canadian networks don't usually post, but will warn you onscreen about the network extortion.

djkbooks Aug 27th, 2003 10:10 PM

Note that if you use ATM's in Canada, it's best to use one at a bank, as opposed to the free standing machines found at malls, hotel lobbies, restaurant foyers, etc. Those at the banks tend not to charge a fee, whereas the others nearly always have a fee.

Kostroma Aug 28th, 2003 07:28 AM

It also helps to see if your bank has an affiliation with a Canadian bank. On my last trip to Canada, I found out that Bank of America is partnered with Scotiabank, so I was able to withdraw money from my bank account with no fee to speak of.

djkbooks Sep 5th, 2003 06:26 PM

Re: Traveler's Checks - some years ago we got ours through AAA with no fees and around 99% of the interbank rate in foreign denominations.

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