At Harrods this spring they offered the choice of charging in pounds or dollars and said what the exchange rate was if I went with dollars. There was no grief when I turned them down.

You have a right to have the charge made in the currency that the item is being offered for sale.

This would be the same as going to a store in your own community and the store charge in a foreign currency.

Keith

Out of curiosity, what did you think of the Harrods's rate? Did it seem good?

I had read about this issue here before my trip to Italy last summer so I was kind of watching for it. It did happen a few times. Each time I told them I wanted the charge in Euros not dollars and they said there was nothing they could do about it, that the machine recognized American cards and made the conversion. Three different clerks told me they had noticed it happening when they got new credit card machines. The rate was not favorable but wasn't horrible either. At the time the exchange rate was about 1.22 or 1.24 and the rate they charged was 1.27. So since they were small charges I just let it go. Would of course be a bigger deal for large charges like hotel rooms or car rentals.

I get the impression this is something we are going to see more of in the future. I hope I am wrong but that's how it looks. I find it hard to believe that three or flour different clerks in small stores would all lie about being able to flip a switch or whatever to charge in the desired currency, especially when specifically asked.

I believe they are wrong...as I understand the system you do have the right to ask the charge be written up in local currency and I am sure there is a button they could push to write the charge up in local currency...I, being petty and hostile of course, would have screamed bloody murder. You being nice just paid and walked away.

Oh well!

This happened to me some years ago while I was in Brazil. I was at H.Stern and they insisted on charging my card in US Dollars. I insisted they charge my card in Reales and we went back and forth. In the mean time I noticed several other non American tourists had their sales rung up.....with Reales.
I ended up not buying from them. I got home and called Mastercard International and was advised they should have the capability to transact in their local currency. I imagined that it was a ploy for them to get a more favorable exchange rate because of the dollar at that time. I am not sure though...

This happened to us, just 2 weeks ago, at a "Rick Steves" hotel, in Varenna, Italy. the Hotel Eremo Gaudio, presented a charge ticket, in USD and euros. When the bill came through, the rate of "exchange" by the hotel, was at 1.27--the highest rate we paid! We really didn't examine the bill closely enough--our mistake.

It may be a good idea to call the credit card company to ask, I guess. I should probably do this. I mean, it is potentially possible that a clerk really doesn't know how to work a machine or change its default settings. So it'll be interesting to see if a dollar amount can subsequently be reversed for a euro amount (I doubt it though).

111op, Harrods's rate wasn't outragous. Better than a Bureau de Change, but not as good as using an ATM or charging the card in pounds.

Keith

Thanks. The exchange outlets are usually pretty horrible though -- first the rate isn't good, and they typically tag on a service charge too. Pretty scary.

Where can I read xyz's discussion with Ryan about banks?

Alfmoody

If you click on xyz's name you will get a list of the threads to which he/she has posted. I believe the discussion in question is on a thread entitled Continental Mastercard or something like that. I tried to copy the URL for you but something screwed up.

Regarding the claim by a hotel that machines 'recognize' American cards and automatically do conversion -- if so, surely this is because the hotel or business in question programmed the machine to do so, which hardly renders them blameless.

Sue...

The who principle of this new system of dynamic currency conversion is that the cc machines recognize what country the presented cc is denominated in.

You could be in a euro country and present a UK credit card, the machine will recognize (if the company has subscribed to the dynamic currency conversion system) that a UK credit card has been presented and suggest a price in sterling, if an Australian card is presented it will suggest a price in Australian dollars etc.

alfmoody...

Ryan claims to be involved with a bank and is speaking of a bank perspective which I am sure is true.

He doesn't like me calling the behaviour of banks in the US that add an additional 2% to already converted charges near criminal. He goes on to admit that banks do not provide any service for this charge since the charges are converted by the visa/mc system which assume all the risks inherent in foreign currency transactions. When the charge reaches the US bank, it has already been converted and it doesn't matter whether the charge was originated in New York, London, or Timbuctoo.

Having said that, he says the charge is not near criminal as the charges are explained to people (in the 20 page fine print of the customer agreement with the bank), and that the banks have a right to charge for anything they damn well please as they have to cover costs that they don't charge for such as fraud, high risk customers etc. Lying to customers that they are charging 2% to cover foreign currency exchange to him is not near criminal

Oh well, sometimes people can't see the forest through the trees.

I'm not sure if a proprietor necessarily knows what his/her machine is doing. Basically, who pockets the 3% (or x%), if the rate is unfavorable? The proprietor? Or the bank/entity that provides the machines to the business? Or do they split the profits?

I can definitely accept the fact that machines are able to do the dynamic conversion. It's what happens afterwards that's a little more unclear to me.

I missed the discussion between you and Ryan the first time. In reading a summary of it, I guess he has a point that the charges are not necessarily criminal. I do find the practice dishonest. That's why I've switched to MBNA when I travel.

There're lots of similar dishonest business practices, I find. I find that unless I contact my bank to ask about the best money market rates, they're never given to me. I need to call my phone companies to figure out what the best rates are, etc.

I just have a distaste of these businesses in general. But they're doing is perhaps not criminal, but there's a lot of withholding of information. These businesses are not going to be forthright in terms of telling their customers what may be best for them.

As I understand it from my reading (and I don't work for a bank but I read up on this stuff a lot)...

Under the old system, a merchant opened up cc accounts with his or her home country bank (let's say Ireland) and then through a subsidiary opened up a cc account with a US bank say Bank of America. The charge was deposited in the appropriate account and the merchant pocked the inflated exchange rate that was used in the exchange; as much as 6 or 7%...

Under this new systen, the purpose is to keep the currency conversion out of the visa/mc system. It allows the dynamic currency conversion financial institution to pocket the difference between the interbank rate and the rate used to dynamically convert the amount. It then splits the difference with the merchant and this is the part that is fuzzy the converted amount enters the international cc system already converted.

Say something costs £10 and the interbank exchange rate is $1.80. Under normal cc rules, the merchant would enter a £10 charge, get his £10 (minus the discount rate but let's leave that out of the discussion for simplicity sake) and the charge when entering the international cc system would convert to $18.18 ($18 using the interbank rate and the 1% charge or $.18). The charge reaches the US bank as $18.18 and if it is a well behaved bank such as MBNA, it remains $18.18 or in the case of the near criminal banks an additional 2% is now added to the charge which would be $.36 and the charge now comes into your account at $18.54..(some banks even have the gall to compound the 2% - Chase is one - and applies the 2% to the already converted rate!). Visa/mc pockets $.18, the home bank pockets $.54. Back in England, the merchant's bank pockets nothing, it simply played with the original £10.

Now here comes dynamic currency conversion. They might use a rate of internet + 5% so on the merchant's terminal, the charge comes up at $18.90. You complete the transaction, the merchant deposits it. His account with the cc provider is credited for £10, it then is sent through the international cc system entering it on the us side as a charge for $18.90. The provider of the cc has just pocketed $.90 and then rebates part of it back to the merchant...the merchant wins, the provider of the cc wins, your bank might win if you pay interest (although they don't get the additional 2%), the only one who loses is you.

Of course I know what everybody is thinking who has had the patience to read through this entire long winded thread. Who cares about 90 cents...well what if the charge was £100? or £1,000 and what if 1,000 such transactions take place at a merchant each week or month or whatever.

On your side, perhaps no big deal. On the merchant's side, a nice profit. On the dynamic currency converter's side a nice profit....

I think this is the way it works...

I guess it makes sense the merchant gets a rebate -- I mean, why bother using a new machine that does the dynamic conversion otherwise? Economically, it makes sense that there should be an incentive for the merchant.

So if that's the case, persumably the merchant should have a manual setting that will turn the conversion off. I'll have to call my credit card company and ask, as I keep saying.

I think that saving 2% or x% is something. I mean, it requires hardly any work on my part. Why leave money on the table? That's why I've stopped using my Citibank Visa/MC -- I think that they charge something beyond the 2% (4%?) -- even though all my accounts are linked with them. I used to pay my cc bills by transferring funds online.

xyz123

That, then, is truly astounding; as you say, it has significant implications in the aggregate if not in the individual case. This strikes me as inflationary in the extreme - or is this a naive notion? What have various official gurus (e.g. Federal Reserve chairman) had to say about this, if anything?

I still think the merchant is not altogether innocent - after all, he might well have actively sought to be part of such a program. Furthermore, the consumer ought to at least have the right to know the details in advance of purchase, so as to make an informed decision possible.

Sue...

Do remember one thing about the system...it is supposed to be voluntary. In all the advertising to merchants about dynamic currency conversion I have read on the web, customers are supposed to have their choice to have the charges written up in local currency despite what the clerks said to a poster on this thread.

And you will find some very naive people, the same people who don't mind the 2% rip off by the near criminal credit card banks, who utters such moronic things as, "so what if it costs me another 3% for my holiday. I'm spending $3,000 anyway. What's another $90?" Or "I'd rather know exactly what it is costing me than to receive a surprise when I get the credit card statement."

According to this URL, transaction processing machines that are capable of suggesting a currency conversion are indeed being marketed worldwide. The machine suggests a conversion rate based either on an automatic read of the nationality of the card, or by requesting it from the merchant to input same.

However, as I suspected, the machines do NOT automatically apply the conversion rate, or in other words, they do NOT automatically convert the currency. They do so ONLY after the merchant confirms it by pressing a programmed key (in this case, ENTER) - and presumably only after first asking their customer if they wish to participate in Dynamic Currency Conversion (DCC).

http://www.planetpayment.com/CurrConv_mer.cfm

This URL makes clear that DCC increases the bottom line for the merchant, over and above any method formerly used by the merchant.