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Credit Card Currency Conversion Fees
I just received a notice from MBNA that they are instituting a new 3%
fee for all charges made outsdie the USA __OR__ in a foreign currency. Also, "For transaction made in a foreign currency the conversion rate will be reduced by 1% compared to the way it was previously determined." What does "reduced" mean. Does that mean I pay 1% less for the currency or does it mean I get 1% less of the foreign currency? So, is the oversll effect 2% or 4%? I can guess. |
#2
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"Robert J Carpenter" wrote in message news:%yzbe.13231$Nc.11257@trnddc08... I just received a notice from MBNA that they are instituting a new 3% fee for all charges made outsdie the USA __OR__ in a foreign currency. Also, "For transaction made in a foreign currency the conversion rate will be reduced by 1% compared to the way it was previously determined." What does "reduced" mean. Does that mean I pay 1% less for the currency or does it mean I get 1% less of the foreign currency? Your card probably has a currency conversion fee (read the T&C's, it should be there somewhere). Sounds like they are reducing this, so you'll get charged 1% less in the currency conversion fee, but 3% more as a new "foreign use" fee. So you'll be 2% worse off where you pay in the local currency, and 3% worse off if you pay is US$ abroad. Best check with them to be sure. Or get a new credit card, the fees seem high. What this is all about is a war as to who gets the lucrative currency conversion markup. What used to happen was you use your card abroad, you pay in the local currency, VISA/MasterCard convert it to your home currency and charge your bank, taking a small markup on the interbank rate. Your bank then charges you, taking a further markup on the rate VISA/MasterCard charged them (although a few don't, and make this a selling point). Recently some bright spark came up with an idea called "Dynamic Currency Conversion", where the retailer's POS terminal detects the nationality of your card and converts the currency at the POS. The customer gets a slip to sign with the currency conveniently converted into their home currency. The catch of course is that the rate they use has commission built into it, and to encourage retailers to use DCC, they give the retailer some of the commission. So a customer who has gone to the effort of getting a card with no foreign currency markup will still get hit with high conversion fees - unless they remember to always demand to pay in the local currency. The other effect of course is that VISA, MasterCard, and the banks lose out on their highly profitable exchange rate markup fees. Which is why VISA and MasterCard, and the banks, are starting to introduce "foreign use" fees as a replacement (or addition) to exchange rate markup fees, so they can charge you even if the currency is converted at the POS. I guess the next step in this war is for the DCC operators to set up agencies in every major country, so when you stay in a hotel abroad you'll actually get charged by some agency in your home country. If this happens, banks who introduced high "foreign use" fees could have scored a big own goal. Instead they should be competing with the DCC operators, offering lower conversion fees and pointing this out to their customers. -- Andy |
#3
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What CRAP; just got this notice today for the primary CC I was planning
to use in Europe next month... Come May 25th I'll be sure to cut the SOB up in Spain! Thanks; I have been 'notified' of my new terms... Tim K "Robert J Carpenter" wrote in message news:%yzbe.13231$Nc.11257@trnddc08... I just received a notice from MBNA that they are instituting a new 3% fee for all charges made outsdie the USA __OR__ in a foreign currency. Also, "For transaction made in a foreign currency the conversion rate will be reduced by 1% compared to the way it was previously determined." What does "reduced" mean. Does that mean I pay 1% less for the currency or does it mean I get 1% less of the foreign currency? So, is the oversll effect 2% or 4%? I can guess. |
#4
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"Robert J Carpenter" wrote in message news:%yzbe.13231$Nc.11257@trnddc08... I just received a notice from MBNA that they are instituting a new 3% fee for all charges made outsdie the USA __OR__ in a foreign currency. Also, "For transaction made in a foreign currency the conversion rate will be reduced by 1% compared to the way it was previously determined." What does "reduced" mean. Does that mean I pay 1% less for the currency or does it mean I get 1% less of the foreign currency? Your card probably has a currency conversion fee (read the T&C's, it should be there somewhere). Sounds like they are reducing this, so you'll get charged 1% less in the currency conversion fee, but 3% more as a new "foreign use" fee. So you'll be 2% worse off where you pay in the local currency, and 3% worse off if you pay is US$ abroad. Best check with them to be sure. Or get a new credit card, the fees seem high. What this is all about is a war as to who gets the lucrative currency conversion markup. What used to happen was you use your card abroad, you pay in the local currency, VISA/MasterCard convert it to your home currency and charge your bank, taking a small markup on the interbank rate. Your bank then charges you, taking a further markup on the rate VISA/MasterCard charged them (although a few don't, and make this a selling point). Recently some bright spark came up with an idea called "Dynamic Currency Conversion", where the retailer's POS terminal detects the nationality of your card and converts the currency at the POS. The customer gets a slip to sign with the currency conveniently converted into their home currency. The catch of course is that the rate they use has commission built into it, and to encourage retailers to use DCC, they give the retailer some of the commission. So a customer who has gone to the effort of getting a card with no foreign currency markup will still get hit with high conversion fees - unless they remember to always demand to pay in the local currency. The other effect of course is that VISA, MasterCard, and the banks lose out on their highly profitable exchange rate markup fees. Which is why VISA and MasterCard, and the banks, are starting to introduce "foreign use" fees as a replacement (or addition) to exchange rate markup fees, so they can charge you even if the currency is converted at the POS. I guess the next step in this war is for the DCC operators to set up agencies in every major country, so when you stay in a hotel abroad you'll actually get charged by some agency in your home country. If this happens, banks who introduced high "foreign use" fees could have scored a big own goal. Instead they should be competing with the DCC operators, offering lower conversion fees and pointing this out to their customers. -- Andy |
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