Just read of an on-going credit card scam very prevelent in Ireland but also going on in other countries.

Many touristy places have set up credit card accounts denominated in US dollars. When unsuspecting tourists go into these places, they are told as a courtesy they will write the charge up in US dollars avoiding the currency surcharges imposed by MC or Visa. And the stupid tourists go right ahead and let them do it.

What is not being said is the rate being used is a total rip off above the rate charged by MC/Visa. Do remember that MC/Visa adds a 1% service charge to foreign currency transactions on the best rate available, the interbank rate. The interbank rate is a good 10% less than the tourist rate so that even if you are dumb enough to use a credit card by one of the naughty banks ripping you off with an additional 2% fee, you still pay much more if the charge is run off in USD.

Always insist when using a credit card that the charge be written up in local currency. Also, try to do the proper research and realize which banks are adding an additional 2% to foreign credit card transactions and avoid them.

I'm puzzled about who makes money out of this.

As described, it sounds as if only the bank is making money. Which implies that either the merchant is, altruistically, annoying his customers to make a bank rich (which would be against nature). Or the merchant is getting a kick back from AIB, or whoever. Behaviour that, even by the standards of banks, would be blatantly dishonest - and possibly illegal.

So, as Cicero put it: cui bono?

The merchant would would be in a position to make money on this because it is the merchant that is applying the (presumably bogus) exchange rate, not the bank. The merchant simply needs to cover whatever exchange costs might be involved in converting the dollars back to local currency (a few percentage points). It is certainly something that can be built in to the rate that the business is applying to the transaction if there is already 10 percent to play with.

There is nothing inherently wrong with paying in dollars if the exchange rate is fair and that essentially means the interbank rate, (certainly NOT the rate someone might generally pay to do paper currency exchanges at a streetside or airport booth, etc.) The moral of the story: know your exchange rates and save your credit cards for reputable businesses. For things that look or sound a little shakey, pay in local currency that you get from ATMs.

I think I've read this before and I believe that info was taken from Frommers. Philosophically, if someone doesn't bother to check what the conversion rate is or know enough to even ask, it won't make any difference because they don't know enough to realize what is being done and never will. I didn't even know foreign stores were allowed to have charge accounts in another country's currency, but I guess so.

In any case, the store would profit, of course. They are charging an amount to someone's card that is greater than the purchase price and that's what they will get reimbursed (minus any small percentage they owe MC/Visa for the service). It's the same as asking how could the store profit if they charged you $200 on your card instead of the price tag of $150 for an item you bought.

This is what I wrote last August about my experience in Ireland. It still goes on, as I've found from my trips this year:

It's called 'Dynamic Currency Conversion' and is offered by increasing numbers of tourism-oriented establishments: hotels, car rentals, souvenir shops, restaurants etc. If the merchant is using this system, when your card is swiped, the machine displays the amount both in the local currency and in the card's billing currency. They will present this as a service to you, because you'll know the exact amount that will appear on your statement and it takes away the uncertainty over exchange rates, extra service charge and so on, and urge you to accept the amount in your home currency. Be very careful. The exchange rates used are around 3% worse than interbank rates in the ones I've come across. OK, many card issuers add similar percentage for foreign transactions, but there are some that do not and you lose out. Also the merchants get a share of the profit from currency conversion. You do NOT have to accept the converted figure. When the card is swiped, state very clearly you wish to be billed in local currency, and sign ONLY the slip that shows the original amount on the final line.
It's getting increasingly common in Ireland and UK, and spreading elsewhere. Card processing companies are selling this as extra revenue-generating service to retailers. I find it disingenious and misleading for consumers.

Speak for your own Visa (issuing bank) as not all of them charge for foreign currency transactions.

Intrepid...

Sorry to disillusion you. MC/Visa when converting foreign charges to US dollars use the interbank rate and add on 1% for their service. Every bank passes this along whether they you separately (which was what the suit in California was all about) or not (it is usually buried within the exchange rate). Having customer service reps tell you there is no surcharge doesn't mean there isn't one; most of them don't have a clue.

It is the extra 2% surcharge some rip off banks add to the amount processed by MC/Visa that folks are complaining about.

I've had one hotel do that for me in Ireland. The rate was actually the correct one, but the problem is that I live in Northern Ireland and used a credit card from my bank there and so the dollars were converted back to pounds!

I think that labeling this activity a 'scam' is not correct. Businesses and banks and credit card companies have to cover costs of operation or they will go out of business. All are seeking 'customer friendly' ways to achieve this. Eventually we may have a universal currency and zero costs. I have yet to see a figure noting how much the Euro multi-country currency has saved consumers in exchange costs. Polite suggestion. Query the Irish Tourist Board.

I have made several purchases in Harrod's and was always asked if I wanted to charge in pounds or dollars. I charged in dollars. Did I get scammed?

Wags,

You didn't get scammed, but you probably got a crappy exchange rate so it cost you a little more.

Personally, I would call it a scam as it is being presented as if the merchant is trying to do you a favour with phrases such as, "you'll save the credit card conversion fees." It relies on people who do not have a clue as to what happens with currency conversions with a credit card (just as an example, why is anybody still using credit cards issued by the banks charging 2% on top of the 1% MC/Visa fee when it is very simple to get a credit card from a bank not doing it...of course you'll get answers such as for the frequent flyer miles which might be a reasonable answer but for others it's pure ignorance when you read responses such as what's the big deal...on a trip worth $2,000 an extra 2% is only $40.) Of course my opinion, based on reading some great posts on other boards, is that had people stopped using those credit cards when this began, the fee would have been still born.

Still, it remains a matter of personal opinion. At least when you make a decision know all the facts.