Another tidbit on currency conversion. This time on credit/debit networks. A long mind-numbing discussion** on Flyertalk has some folks reporting that they generally see a better conversion rate from MasterCard than from VISA, often to the tune of 0.5% better. The conjecture is that MasterCard uses some average of the rates on a given day (i.e. the forex mid rate), while VISA probably picks the peak - playing the spread on any given day. Could be. I decided to compare and also look at the spreads for a given day.
I looked at a recent transaction where the VISA EUR to USD rate for the date posted was 1.108689. The conversion for my transaction was almost exact (well within the rounding error of 1c).
I checked the Mastercard EUR to USD conversion for that same posting date which was 1.110700. Almost identical. The MasterCard rate was just a hair worse by 0.18%. Nothing worth bothering about. So I clearly didn't see a MasterCard advantage in this case.
But I got curious about the spread between their EUR to USD rate and the USD to EUR rate for both networks. I compared them by comparing their published EUR to USD rate and inverting the published USD to EUR rate.
|6-28-16|| EUR to USD|| USD to EUR|| spread|
|VISA|| 1.108689|| 0.911652|| 1.07%|
|MasterCard|| 1.110700|| 0.900090|| -0.03%|
VISA Exchange Rate Calculator - https://usa.visa.com/support/consume...lculator.html/
Mastercard Currency Conversion Tool - https://www.mastercard.com/global/currencyconversion/
So in this case VISA does have a significant (>1%) spread between converting one direction and the other, but Mastercard essentially has none. Yet for my conversion of Euros back to USD, VISA gave me a slightly better conversion rate.
From my little one day experiment, I would think that if the currency is converted to USD, you have some advantage, but if you are converting USD and billed in some other currency, you are probably at a disadvantage with VISA. But maybe not with Mastercard.
Note that for both networks, the rate used is the rate in effect the day the transaction posted (not the transaction date). VISA rates are based on the foreign exchange range from the previous day. MasterCard - I'm not sure what theirs is based on.
If you have a no FTF MasterCard, you might want to see if you are getting better conversions with VISA. All my cards are VISA and I'm loath to take on yet another one.
P.S. If you thought this was mind-numbing, don't read the FlyerTalk thread!!!