Credit card alert on exchange rate

Old Nov 2nd, 2003, 10:28 PM
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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.

erinb is offline  
Old Nov 3rd, 2003, 03:40 AM
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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.
ira is offline  
Old Nov 3rd, 2003, 04:57 AM
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Using a credit card for cash advances rather than an ATM card is VERY expensive.
Gretchen is online now  
Old Nov 3rd, 2003, 05:25 AM
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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 is offline  
Old Nov 3rd, 2003, 08:24 AM
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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.
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Old Nov 3rd, 2003, 08:29 AM
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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.
erinb is offline  
Old Nov 3rd, 2003, 09:08 AM
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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.
djkbooks is offline  
Old Nov 3rd, 2003, 09:13 AM
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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.
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Old Nov 3rd, 2003, 09:59 AM
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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.
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Old Nov 3rd, 2003, 10:02 AM
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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.
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Old Nov 3rd, 2003, 10:27 AM
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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?
Patrick is offline  
Old Nov 3rd, 2003, 10:55 AM
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sounds like just the sort of class action suits banks love to avoid...feel free to threaten them
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Old Nov 3rd, 2003, 11:00 AM
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The problem with many class action that the lawyers get cash and the customers get vouchers.
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Old Nov 3rd, 2003, 11:06 AM
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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 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.
xyz123 is offline  
Old Nov 3rd, 2003, 11:32 AM
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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.
Lovejoy is offline  
Old Nov 3rd, 2003, 11:38 AM
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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 is offline  
Old Nov 3rd, 2003, 12:01 PM
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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.
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Old Nov 3rd, 2003, 12:08 PM
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My Capital One exchange rates have been very good.

Keith is offline  
Old Nov 3rd, 2003, 12:14 PM
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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 is offline  
Old Nov 3rd, 2003, 02:44 PM
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Posts: 5,271'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 is offline  

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