Related to the question about chip and pin, but different enough for a new topic, IMO.
I have been reading up to decide the best credit card to bring to London in a few months. Two years ago we had a trip to Paris and I certainly noticed a significant chunk of change going to “foreign currency transaction/exchange fees”. Most cards have at least a few % point fee added on.
So naturally a card like chase sapphire preferred or similar with 0 exchange fees sounds good.
However, I noted some users of these cards complained that they were getting a less favorable exchange rate- in other words they speculated that the banks may be using higher exchange rates at the time of transaction in order to still get their fee, but in a less transparent way.
Curious if anyone has paid this close of attention and noticed whether or not there is merit to this accusation?
Scott, this information from Visa’s website may be of help. It briefly explains Visa’s process of choosing from several available exchange rates in the wholesale market and the possibility that your rate might be set by a merchant’s choice. In either case, it is not the issuer that sets the rate, it is either the system or the merchant.
As far as I know, if you don’t ask for the merchant to charge you in dollars, then it’s only a timing issue.
I’ve used Chase Sapphire many times, have checked in the past, and haven’t had any issues.
If someone is asking the merchant to charge you in dollars, then they get to decide what rate to use, not the credit card issuer. Short answer is always ask to be charged in local currency, never dollars outside the US.
Absolutely. Always charge in local currency. Even then, according to the Visa website they get their pick of wholesale rates to use for conversion. However, there would be very little difference between them I suspect.
They probably choose a more favorable wholesale rate than the others. Who they choose is up to them but given their penetration in the business market I am not surprised that they are competitive. Besides they charge for their cards. Many others do not. Probably makes a modicum of difference.
Totally agree on using local currency. I use Chase United & Amex and they both have no foreign transaction fees. If, by some chance, the merchant has an option on exchange rates, it still would be nowhere near the 3% or 4% that a transaction fee might reach.
Amex exchange rates tend to be a touch better but it is MUCH harder to use in Europe. Many places do not accept it at all, and others that do charge a large fee.
Have any of you checked the EOD or prior day exchange rates versus the charged exchange rate?
My experience is that the fx rates applied by the banks are not competitive at all. I have actually calculated the rates my Chase Sapphire Preferred charged for Europe trips. My conclusion is that the loss of transaction fees are built into the exchange rate the bank applies (meaning they are padded or added on whichever term applies best). They are not market fx or closing fx rates. Fees are mostly free money for banks (and airlines) and why would they give it up?
Nothing is ever free with a financial institution.
They are definitely not fx rates. They are wholesale rates. There is a markup between fx and wholesale. The amount of the markup depends on which currency trader they use. You know they will make money in several ways on every transaction but we have no real control over that.