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#71
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Cashing Travellers checks in USA
In message Robin Stober
was claimed to have wrote: Hatunen wrote: On Tue, 01 Dec 2009 15:58:22 -0800, SMS wrote: I'm sure Capital 1 has figured that they make more money in interest and merchant fees from gaining more card holders than they lose from not charging the foreign transaction fees. I'd like to see some sort of evidence that is true. The fact that it's true is rather its own evidence. Financial institutions make decisions to maximize their profit. It might not be the right decision (in the sense that it doesn't actually maximize their profit), but I think there's no doubt that Capital One analyzed the possibilities and decided on this scenario because they thought it would provide the most revenue. In other words, they didn't decide to just be nice to travelers who were doing currency conversions. "Being nice" is sometimes the best financial move too. Even if bank isn't directly coming out ahead by eliminating foreign transaction fees, they might have found that their customers are willing to go elsewhere to get a better deal on this particular issue, so it's worth taking the loss on the individual transactions to retain those customers. |
#72
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Cashing Travellers checks in USA
DevilsPGD wrote:
Even if bank isn't directly coming out ahead by eliminating foreign transaction fees, they might have found that their customers are willing to go elsewhere to get a better deal on this particular issue, so it's worth taking the loss on the individual transactions to retain those customers. Well stated. People look at interest rates (at least those foolish enough to carry a balance) and rewards and fees when selecting a credit card. Since most card holders only occasionally use their cards outside the U.S., the revenue Capital 1 and Schwab are giving up by foregoing their own foreign transaction fees (and ponying up for the fees charged by MC/Visa) isn't a heck of a lot compared to the other revenue they're getting from card holders. It's a good marketing strategy that the larger card issuers don't want to follow, and since so few card holders understand this whole issue and/or are aware of ways around it, the larger card issuers are pretty safe. I wonder how long Schwab can continue their 2% cash back. Countrywide did 2% for about a year before they dropped it. |
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