Credit card alert on exchange rate
 

hi all,

Just found out some terrible news for my friend Penny today.

We just got back about a week ago from our London trip and we had both used our Visa's extensively on the trip. Me for all my cash advances and purchases and she for purchases and our hotel bill (my limit is low and I didn't want to have to worry about the bill so I gave her the money in advance for my part of the bill.)

In my case, my bank charged me $.75 for each ATM withdrawal and the rate ranged from 1.65 to about 1.69 on cash advances and purchases, which would be about right given that the exhange rate was running 1.63 to 1.67 during the time we were there, and most visa middle processors charge about a 1-2% transaction fee. Penny's cash advances from her check card were about the same.

The horror was in her visa thru Citibank. On all her purchases and the hotel bill they charged her an exchange rate from 1.776 to about 1.798 depending on the day. Even if they had charged the max rate of 2% above the conversion that would have only been about 4 cents per pound. This was almost 10 cents above the exchange rate.

If you have citibank visa or mastercard beware, they are charging well over the standard max and you might want to use one of your other cards. I know the pd versus dollar is currently running about 1.69 right now, but all her purchases and our hotel bill came in within a day or two of the transaction and the rate at the time ranged from 1.63 to 1.67 or 1.68.

She is going to try and challenge this, because nowhere in her agreement do they say they are going to charge so much for foreign conversion. She used this card because she has a really high limit on it and almost a non existant interest rate for 6 more months. On the amount she charged that hiked it up almost $200 more dollars in the conversion.

Just beware, and if you have Citibank, you might want to inquire what the charges will be added.

Dear erin,

Thank you for the warning. It's another reminder that we should check with our bank regarding charges for use of the card, foreign exchange and cash advances.

Using a credit card for cash advances rather than an ATM card is VERY expensive.

Ira, checking with the bank will do no good in my opinion. Even if you get the truth that they are adding the 1% from Visa and a 2% additional, there is no real way you can find out what basic exchange rate they are starting with, but the real secret is what exchange rate they are starting with, and I defy anyone to get a straight answer from them -- just like the banks.

Patrick--As it was explained to me, the basic rate is the same for all Visa cards, for all MCs, etc.--the consumer pays the wholesale rate of exchange, a preferred rate normally reserved for banks and large companies. This is done by Visa or MC, not the bank that issued the card--so no matter which bank issued your particular Visa or MC, you get the same basic rate as anyone else using a credit card.

Visa and MC both add a 1% foreign conversion fee on all transactions. Then the issuing bank might or might not add an additional percentage fee (usually 1% or 2%), it just depends on that particular bank's policy.

hi,

Patrick, I really agree with you on this. It's like some mystery, but it shouldn't be.

Penny is going to challenge them on it and see how it goes. On one day, it was actually 14 cents more per pound than the actual exhange rate that day.

And Gretchen, what you say about cash advances on credit cards is true for most cards except credit union visas.

Penny had not actually taken any cash advances on her visa, just purchases and the hotel, but I had and my card is a good one in that they do not charge me anymore in interest for my cash advances than my purchases, about 9 percent.

Penny's bill was quite a markup for us, especially with the total hotel bill on her card. I had paid her in advance for the hotel bill, but with the extra exhange rate added, I will end up owing her about $100 more on the hotel for the convenience. I will not mind paying her if that is what we end up with because I don't want her to have to bear that burden, but it is a difference in what we originally expected.

She won't be using that card again overseas, I can tell you that.

You can find the exchange rate and fees (if any) your credit card issuer charges for foreign transactions in your printed cardholder agreement.

Best bet is to phone the issuer of your card(s) just ahead of each trip, ask for a supervisor, write down the person's name, and inquire about the exchange rate and fees, and also request that a copy of the current cardholder agreement be mailed to you.

I'm glad you posted this for other travelers. We were in Italy recently and were unaware that our Chase Continental Airline Mastercard and American Express would charge 2% more on every transaction. We charged one item on our Citibank Platinum Select card, which charged an extra 3%. ATM cash is the most economical way to go to avoid extra fees.

She should call and ask to get notice of the exact rate they use, but I think you have some misunderstandings about the CC exchange. I had a Citibank VISA card which I used in Europe now and again (over the last 15 years, I just got rid of it bout two years ago) and they did charge about only 3 pct over the interbank rate when I used it, just like they said. It isn't a two percent max, but three because VISA charges one pct and they add on two.

I think one wrong assumption you are making is that the exchange rate used is the one in effect on the date of the purchase. That isn't the case. the exchange rate used is the one when the bank(s) actually converted the money and that can range from 1 to 14 days after the purchase date.

That should account for quite as much difference as you describe, however, as that rate would reflect about a 1.72 bank rate and it wasn't that high in the last month or so. I'm not sure about this, but I think they may charge some customers more than others based on credit rating, your plan, etc. I think I've read that, but I'm not sure.

So, she should definitely ask for details on how that rate was calculated--what the exact rate was and the date it was based on, etc. A good card company will tell you exactly what rate was used and what date the conversion was done. I inquired once of my current company (Capital One) and they told me exactly these details and also told me about the date difference. I also assumed the rate and transaction are rather instantaneous on the date the purchase was made, but it isn't.

I had a typo above -- I meant that date differences should NOT account for as big a difference as you cite, it seems to me, although it will come very close if they use the peak rate at any time as oanda says the peak rate was 1.71 during the last month or so.

To clarify why I say it is impossible to get a real handle on the actual rate they start with:
I have often made both credit card charges and ATM withdrawals within minutes of each other. When I check my statements later I see that both went through that same day. Yet even allowing for the total of 3% from Citibank on the credit card (yes I do it to get FF miles, worth it to me, so please don't quibble), it is often true that the base rates were considerably different. Sometimes even with the supposed 3%, the ATM rate will be the same, although they swear there is no charge for it, they are using the official base rate. People say the rate changes from hour to hour, but I find it hard to accept that the rate regularly changes 3 % within an hour!

Another favorite was two of us splitting bills -- putting half on each of our credit cards. When we got home and compared notes, we have found even though the charges were made at the same time, and even though they were both posted to our accounts on the same day, there can be a major discrepancey. In this case it was her card being a Capitol One which they insist has no extra fee (but I guess the standard 1%) and my Citibank with a supposed 3% total, yet the actual dollars we were charged ends up being slightly higher on her card than on my card!! Explain that one. This happened consistently both times we did this and checked later. Like it or not, argue or not, I find it hard to believe that Capitol One was starting with the same rate as Citibank. If so, how come my extra percentage didn't cost a thing, in fact saved me money?

sounds like just the sort of class action suits banks love to avoid...feel free to threaten them

The problem with many class action suits..is that the lawyers get cash and the customers get vouchers.

This is exactly what the law suit was about that the banks lost in California about a year ago.

Unfortunately, the Court did not see fit to rule what the banks are doing is illegal; it probably isn't but it certainly is immoral. The banks have nothing to do with the currency conversion yet see fit to impose a 2% currency conversion charge. Try to ask them what you are paying for and they don't have an answer and try to give you some sort of answer to justify the charge.

The court ruled that these charges have to be shown and broken down on statements which is what the banks are in the process of doing. They have also discovered that they can compound the 2% charge that is apply the 2% to the amount after it has been converted and boosted by 1% by Visa/MC. Now I would be the first to admit that this is pennies to the individual card user but a lot of money to the banks.

Having said that, currently the UK£ is about $1.70 US on the interbank rate. You can go to Oanda.com and put in a date and they will give you the internet bank rate as of that date so you can compare. But at $1.70, with the 3% surcharge charged by Citibank, Chase, Bank of America, Bank One, your British pound should come in at about $1.751. With MBNA and Capita One, it would come in at $1.717 which is 3.4 cents per pound. So on a £100 purchase, Citibank et al are pocketing an extra $3.40 of your hard earned money.

Amex charges 2%, no middle person involved 1% about MBNA and Capital One.

The solution is very very simple. Don't use the credit cards issued by the banks adding the 2% surcharge for foreign purchases, use only Capital One and MBNA credit cards.

Actually you are not limited to just MBNA and Capitol One for the 1% rate.I have a MC from USAA federal Saving Bank and from my local Credit Union neither one of which charges anything more than the Visa/MC 1% conversion rate.So just do a little shopping to avoid unnecessary surcharges.

I'm not trying to be argumentative here, xyz, but did you read my post? Explain to me why my Citibank card charged me less than my friend's Capitol One card for equal transactions on the same day (both charging and posting) even though my card admits the extra 3% and her card insists it doesn't charge that? Either they used a different starting exchange rate or something! And please don't tell me that the hour or so difference in posting could have made a better than 2% difference!

Patrick, two pct is not that big a difference in currency fluctuations. they often fluctuate that much within a day or two, you just may not notice. However, I have a Capital One and I have compared rates and charges and they do NOT charge more than the one pct, I have verified that mathematically. It seems you are implying you think they do, but I do not and I have one.

I suspect it's probably just currency fluctuations or the date of the actual currency conversion. I'm not sure if that is the same thing you are calling the date a purchase is posted or not. It isn't something you could tell from a bill. I think an hour or so could indeed change rates by two pct. the fact that the purchase date is the same is not a factor. Also, Citibank does not admit an extra three percent, it is only two percent extra. Capital One does not lie and claim there is not the standard network one percent charge, I have talked with them on these issues a couple times and they never claimed they didn't have that.

My Capital One exchange rates have been very good.

Keith

I can look at my bill and see the exact date is was posted (not necessarily the same as the date it was charged). What I'm talking about here is both our bills show the same charges posted on the same day (as well as being charged the same day). And in the case of comparing my ATM to my credit card, again I'm comparing the exact same posting dates.

And I apologize if I'm unclear. I do mean that Citibank charges 3% total, not 3% extra over the 1%, which should be 2% more total than the Capitol One card. I think that was clearer in my first post, but over simplified in my second one which seems wrong.

I guess the bottom line is. If her bank charged her more in total than my bank did me for the same exact transaction POSTED on the same day, then I don't really care what they say. I prefer the smaller amount (only pennies). Or certainly it's not worth my changing cards and losing my FF miles when charging on that card is going to cost me just as much for whatever reason!

Patrick...you're right. It is unlikely that there is as much as a 2% fluctuation within an hour but it does happen. Also is it possible one charge was a Mastercard and another a visa? The systems operate independently and it might take an extra day for one system to react.

Be that as it may, for the most part Citibank does in its literature make it quite clear they charge an additional 2% on foreign currency transactions above the amount converted by MC (they are primarily now a MC bank although some of their affiliate banks are visa banks) while Capital One's literature indicates no further surcharge is applied.

xyz123, thank you for the oanda.com website.

Patrick, one of my credit card agreements to take effect Nov. 1 reads: "Visa USA Inc. or MasterCard International, Inc. will use their currency conversion procedures in effect when they process the transaction. Currently, to convert the currency to US dollars, they use either a wholesale market rate or a government-mandated rate and add one percent to that rate. We then add two percent to the figure provided to us. The currency conversion rate used on the processing date may differ from the rate in effect on the date you used your card". No secrets there. I don't use this card for foreign travel.
I did review one of my CC statements from the UK and see that the transaction date and posting date in most cases is the same and that the exchange rate to 8 decimal places is different for transactions on the same day. I suspect they are processing in real time.

Erinb, Please let us know how Penny's complaint is resolved.

To start with, you cannot add percents together, it is not mathematically correct.

For example if the wholesale exchange rate prior to adding any percentages on is $1.65, then a 1% markup added in would be $1.665 (1.65 x 101% = 1.665), or a difference of .0165. The question then is the 2% markup on the $1.65 or the $1.665 amount. The numbers are different, adding an additional 2% to the $1.65 is .033, for a gross of $1.683, but adding 2% to %1.665

comes to $1.6983, which is a dramatic difference.

It appears that the additional 2% is being added to the value that the 1% was already added to.

Hello,
I also am going to Scotland in 3 weeks and trying to figure it all out. I called amex. today and they state they will only charge wallstreet stated exchange rate and the 2%. And Bank of American (after many many phone calls to get the correct information) states also will charge the wallstreet stated exchange rate for the day plus 3%. I don't think you can get around all this. I also find in some hotels in scotland they do not accept amex. Which seems to be the cheapest way to go. I was also told today that ATM machines used in Scotland will give you that particular banks exchange rate for the day. And after calling several scottish banks in Edinburgh-the rate today was 1.81. Very high!!!! I am trying not to be concern to much-not alot you can do. However, I do not want to be careless.
Thank you, others, for your input.

Also, I just went on line. Here's an example of how something is so not right about this picture.

We both made purchases on our visa at Windsor castle for our admission fee. The difference in the time of purchase was less than 30 seconds. Both charges showed up on our bills that next day ON the 19th.

Remember same amount, 12.50. My credit union visa charges 1% only, no extra fees. the rate was quoted at 1.696 and a converted amt of $21.19. Yet hers was quoted at 1.7721 and a converted amount of 22.15.

At one of the historical exchange websites for that day, the average was 1.67776 and the high wa 1.6787. If I use the high and add 1% it is very close to my figure on my card. within .001. If I used the 3% the amount should be around 1.7293. Clearly citibank is charging much greater than the 3% they are telling people. I have check at three sites now and the historical high for that day is no high than 1.679. The highest they should charge with a 3% add on is no night than 1.73.

Clearly something else is being charged or they are using exchange rates not true to the history.

I will let you know what she finds out.

thanks guys!

I just read the fine print on some new credit card applications - one a Visa and the other a MasterCard. Both state that if you take a cash advance on a credit card transaction, that an additional 3%, but not less than $5.00 will be incorporated into the transaction. Now adding that to the markup of 1 % or 1% plus 2% is going to be high. Just do the math. By the way, if you do roll over a balance month to month then you need to add the APR on top of that.

Ah ErinB

Perhaps you have not read the whole thread or other similar threads. There is a simple way around the 2% charged by Bank of America...use a card issued by MBNA, Capital One or USAA. These are banks that do not feel it appropriate to rip off their customers for a currency conversion they have nothing to do with.

leslie, your math is wrong.

One pound equals $1.650
1% is 0.0165
Total 1.6665

2% of 1.65 is 0.033 Total 1.6995
2% of 1.6665 0.03333 Total 1.69983

The difference is 33 cents on one thousand pounds. It's not much per person but a nice amount on hundreds of millions of currency exchange.

xyz...

I know that but that does not help us on this purchase...geez...

No, seriously, I knew this about credit cards before I left. Thats why I use my credit union visa most of the time overseas. It's a great rate, they don't stiff me with a large % and they only charge me the $.75 per ATM transaction, which is same at home if I use another ATM than the credit unions. And Natwest in london doesn't charge international cardholders any extra. So for me it is a good deal.

I didn't even take notice when Penny was using a different card. She usually uses her American Airlines visa which gives her a great rate. I think she was using the citibank because it had a ungodly limit on it and she wanted to make sure she had enough.

For the future, we know what to do, we are just trying to get this straightened out now.

thanks

jsmith, I think you need to get yourself a new calculator.

$1.65 x 101% = $1.665
$1.65 x 102% = $1.683
$1.665 x 102% = $1.6983

The difference is a penny. But from what I've read, if you take a cash advance on a credit card, there is an additional 3% charged or $5.00 per transaction (whichever is higher), and that's not even taking into account the APR if you roll over a balance month to month.

$1.6983 x 103% = $1.749249

Wow, this is really becoming mind-boggling. The bottom line is this. My charge on Citibank is less than my friends' charge on Capitol One, charged at the same time, posted on the same day. I don't care if Citibank claims they charge 50% more or even 500% more, the bottom line the actual amount is less, so I really don't care. I'll stick with my Citibank, no matter what Capitol One says they DON'T CHARGE. Is that clear enough?? I don't care the reasons or the justification. The actual amount is all that's important to me, and time and time again the Citibank was the smaller amount, so I'm happy to stick with that.

sevakaur: I think you misunderstand how your ATM will work. The Scottish Bank will not charge you any "exchange" rate. They will give you £ at the commercial rate. They are not converting anything - you will ask for £ and get £ out of the machine.

Your own bank will convert it to a $ amount. It is highly unlikely you would be debited $1.81 at the current rates. I suspect that $1.81 you were quoted is the Scottish bank's exchange rate for $ travelers checks and/or $ currency.

Just reviewed some purchses I made on my Citibank MC in Paris - all were resonable dollar amounts incomparison to the Euros that the items cost. No excessive mark ups or complaints here. Erinb I certainly would pursue an explanation of the charges on Penny's statment, if only to get an answer straight from your CC company (and not all of us "second guessing" !) and she'll have the opportunity to ask them questions. I'm sure you would think to do this anyway, but when Penny is talking to the cc company, tell her to take notes regarding who she talked, to when the call was made, etc. The information will come in handy if she has to make follow-up calls.

Let us know what you find out!

Patrick..

Without going through the whole thread again I have a couple of questions for you...

1. Are you sure the amounts in the foreign currency were entered correctly and were exactly the same to the Eurocent or pence?

2. Are you quoting the rates off both of the statements or did you calculate the rates with a calculator. If the later, is it possible a wrong entry was made?

I am not doubting you believe what you are saying but the reality is, in all due respect to you, that it doesn't make sense.

Citibank absolutely tells its users that it imposes an additional 2% "currency conversion" charge (which we now know has nothing to do with currency conversion but is rather a rip off of the cardholder). Many on this board have verified the additional 2% charge. Capital One is very adamant, and others on the board have verified it, that it does not charge an additional fee about the 1% MC/Visa fee it passes along.

I just don't understand in this one case (was it just one case or a whole series of cases?) how the conversion rate for a charge by Citibank could be better than Capital One.

Please folks in this discussion let's not intermix cash advances or withdrawals from ATM's which might or might not involve other fees etc. We are talking here, and should be talking here, about purchases on a credit card.

If you feel the additional 2% fee that absolutely is charged by Citibank (not supposedly as some have written) is not a big deal, that the air miles you get from American Airlines on a Citibank card are worth the additional 2%, that is your perogative and certainly nobody should question that.

What folks are trying to do here is provide the information so other folks know what they are doing.

To repeat, from my research and from reading other posters, MC/Visa both impose a 1% surcharge on the interbank rate for credit card purchases in foreign currencies. This charge is 100% of the time passed along by the banks. Many of the large credit card banks, specifically Citibank, Chase, Bank of America, Bank One (First USA) then impose an additional 2% fee. Sometimes it is listed separately on the statement, sometimes it is not.

MBNA and Capital One do not impose the additional fee. They simply pass along the 1% Visa/MC fee. Some of the other banks do and some of the other banks don't. You should read the cardholder agreement which is supposed to spell this out. If after that, you don't mind being ripped off by a totally almost fraudulent (of course it's not fraudulent as the fee is spelled out and the banks can charge whatever they want) charge then go ahead, be happy and continue to contribute the large profits banks are making on their credit card operations. After all, nobody should tell anybody else how to or how not to throw away their money. Just be aware of what is going on.

I'm not quoting any rate. What I'm saying is the following (NOT REAL amounts, but an example of how I did it:
On July 10, we eached charged 56 pounds on our own cards.
On her statement it should 56 pounds or $86.67 posted on July 11.
On my statement it showed 56 pounds or $86.53 posted on July 11.

Then a week later we had similar things when we split a hotel bill in Amsterdam. Again the posts were the same dates showed the same exact amount in euro, but my charge in dollars was a few pennies less than hers.

I can't make this any clearer. I don't know how this happens, and I don't know how they arrive at the results. But all I know is it came out less dollars on my bill with a Citibank card than on her bill with a Capitol One card. TWICE!

Similarly I have looked at my Bank Statement and seen the posting for a certain date when I withdrew 300 euro. I'd note the actual dollar amount charged to my account, and divide one by another to get a "rate" that was charged. Then I'd see on my Citibank statement a charge for that exact same date (posted date, not charged date, to match the posted date of the ATM) and again divide the dollar amount by the euro amount and find out that there was no difference, very little difference, or sometimes a "better rate" for the Citibank than for my ATM rate. I have done this many times, and very rarely have I been able to come up with the charge amounts being even 1 to 2% higher than the ATM rates, for whatever reason, never could I find a 3% difference. Oh, and I'm not including any special charge for ATM withdrawals in that.

And regarding throwing money away. Let's assume for a minute that I charge $5000 on a trip to Europe. I get 5000 miles for that. It "costs" me $100 extra if I'm paying 2% more for my card. I consistently use 90,000 miles to get a business class round trip ticket to Europe with two stopovers that is worth a minimum of $10,000. You do the math. 1/16 of the ticket is worth over $550, a bargain for my $100.

Janis,
Thank you. I called several banks in Edinburgh and ask if I walk in off the street with american dollars what rate will I get to exchange to pounds and they all stated 1.81. I was amazed and that is why I called several different banks.
Seva

Patrick..

Thanks for your replay and its civil tone. Nobody was dissing you.

One quick point. Citibank is actually very good when it comes to ATM withdrawals. There are no add on fees for currency conversions on ATM withdrawals using their debit card or a plain vanilla ATM card. As a matter of fact, with many of their accounts, withdrawals from ATM's are not charged on their end and of course we all know that due to Cirrus/Plus regulations, European banks are not allowed to surcharge American debit or ATm card withdrawals.

And of course, as I said in my post with no leaning one way or the other, if paying the surcharge and getting the frequent flyer miles is worth it to you, that's fine and the only one you have to please is yourself.

Not that this makes any difference, but just to clarify. Citibank is my aadvantage Master Card for charges. My ATM is through Bank of America, my regular bank and checking account. They also are great on ATM's. I get a list of "partner" banks in Europe and if using them there is never a charge from BofA for the withdrawals. And beyond that they give me two "free" withdrawals per month from non partner banks. After that, the most I've ever been charged is $1.50.

Is is possible that the type of card from each bank makes a difference in the terms? Is someone using a platinum card and someone else using a "lesser" card? The banks might have different terms depending on what type of card you have. Just a thought.

sevakaur: That is what I thought happened. The rate for trading $ currency to £ would be the worst exchange possible. Your ATM transactions will be MUCH better. Stick to your ATM card for getting cash.