Converting $ to Euros

[Bestwifeever]

I have found this discussion valuable, even the nitpicking parts as it has revealed to me how stupid I was when I was 20 in Greece.

I hope to visit much more of Europe so this is of interest to me.

+1. It might be valuable re whatever currency one is converting from and to.

Thinking about those stacks of travelers checks (to be clear in US dollars) in the late 70s and converting from francs to marks to lira and back again and never knowing how much anything cost or what the exchange rate was, never mind the fees. Good times. And just this fall watching DH converting US $100 into quetzales at an airport currency exchange and biting my tongue from calling him an idiot--so it cost an extra $7, oh well.

 

[audreyh1]

+1. It might be valuable re whatever currency one is converting from and to.

Thinking about those stacks of travelers checks (to be clear in US dollars) in the late 70s and converting from francs to marks to lira and back again and never knowing how much anything cost or what the exchange rate was, never mind the fees. Good times. And just this fall watching DH converting US $100 into quetzales at an airport currency exchange and biting my tongue from calling him an idiot--so it cost an extra $7, oh well.

But in the 90s I used to be able to go to my local AAA office, buy American Express Travelers checks, then find a local American Express office and get a quite decent local exchange rate. Keep track of my checks as cashed so that if something happened to the checks I would get reimbursed. I felt quite secure doing it this way.

Long gone now.

P.S. I still remember a million lira hotel bill. Fortunately that was a company expense.

 

[audreyh1]

I cannot imagine there is a law that says a bank must say they charge a fee that is in fact charged by Visa, not by the bank. Such a law/regulation would indeed mean they could not advertise, no foreign transaction fees if they passed it on. But such a law/regulation would make no sense legally. I remain sceptical.

Some legal history on why things are stated the way they are in the US now.

US Litigation and Credit Card Foreign Transaction Fees

A recently settled class-action lawsuit illuminated the fact that for about 10 years, foreign transaction fees ranging from 1 percent to 3 percent of a purchase were passed on to consumers without their knowledge. These transaction fees included an undisclosed service fee by the issuing bank in addition to MasterCard’s or Visa’s 1 percent fee. The crux of the lawsuit is that these fees were levied without cardholders’ knowledge (they weren’t itemized on the statements), and that these three credit card companies engaged in price-fixing. The suit also charges that Visa and MasterCard inflated their base exchange rates before applying the fee. They didn’t tell consumers the exchange rate they used when converting foreign currency into dollars, and the rate they charged was usually higher than the best available rate at the time of purchase.

About five years ago, “the bank fees started to happen all of a sudden,” says Robert D. Manning, a professor of humanities at the Rochester Institute of Technology and the author of “Credit Card Nation.” As a result of the lawsuit, card companies now have to disclose on the statement what they charge in transaction fees and how they determine the exchange rate. They are not required to roll back the fees, however, and in most cases the companies voluntarily began disclosing fees once the suit was filed. “The [issuing bank’s] fee used to be a pretty standard 1 percent, then it rose to 2 percent pretty much across the board,” Manning added. “The credit card industry knows that consumers focus on interest rates, so they’ve been tacking on all these fees.”

Hidden credit card 'currency conversion fees' for overseas purchases may be returned

Not quite so recent - that was 2006. But still it drives how things are presented today by US issuing banks and why fees appear fairly uniform in how they are presented.

 

[HawkeyeNFO]

xe.com

Check it daily as it is accurate to the minute, and due to living in Europe but receiving pay in dollars. Credit cards with no forex fee are easy to find these days, but I'll have to reopen my Schwab account. USAA is better than most at just 1% for ATM withdrawals, but zero is even better!

 

[audreyh1]

part II...

Additional requirements were imposed by the Credit Card Accountability, Responsibility and Disclosure Act of 2009. I believe US cards are now required to disclose the foreign transaction fees as specific line items on statements. And a common practice is to bundle the VISA/Mastercard conversion fee into their total conversion fee.

Once a nasty surprise for international travelers, foreign transaction fees used to add a hefty toll to credit card bills. But thanks to the Credit Card Accountability, Responsibility and Disclosure Act of 2009, issuers must break down those fees in clear, accessible language, giving travelers advance notice of the real cost of making purchases overseas.

Card companies are now required to show foreign exchange fees as a separate line item on a credit card (when you apply)," says Chris McGinnis, director of the Travel Skills Group in San Francisco. "In the past, the fees were not shown explicitly on statements, but travelers still paid them (because) the fee was bundled into the exchange rate, so it was not noticed."

Issuer fees typically come in two varieties. Some credit card companies charge a flat fee (usually about $5) per foreign transaction. But the more common practice is to charge between 1 percent and 3 percent of the total purchase. That fee can go up somewhat if the issuer uses the Visa or MasterCard network, which charges up to 1 percent per transaction. A number of issuers build the Visa/MasterCard fee into their total foreign transaction fee. Whichever fee structure the issuer uses, customers will see the total foreign transaction fee in the terms and conditions associated with their accounts.

That's certainly how Bank of America does it. DH accidentally used the wrong BofA VISA when ordering something from Canada (forgetting that it was CAD not USD!) And the 3% fee appears as a separate line item in our statement as well as the CAD and USD values. However no such line item appears in any of my credit cards with no foreign transaction fee, including my BofA Travel Rewards Card.

 

[Meadbh]

Meanwhile, in Canada, we get screwed again:

"We found that while the initial currency exchange rate is done at market rates, your rate then includes an additional mark-up which can be as high as 9%! The mark-up is then blended into the exchange rate you see on your receipt, so consumers have little chance of figuring out how much the the bank or exchange bureau actually charged."

"Unfortunately, none of Canada’s largest credit card companies (RBC, TD, CIBC, BMO, Scotia, Capital One, Canadian Tire or PC Bank) offer a credit card without a foreign transaction fee. They all charge a foreign transaction fee of 2.5%, on top of the exchange rate set by Visa or Mastercard. They do the same for debit cards either when making a purchase at a U.S. retailer or from an ATM."

Currency exchange rate fees the banks are hiding from you

 

[Gone4Good]

My question to you Gone4Good is how you are finding it if you are using a card that is not a true 'chip and pin' card.

Hi OldPro,
I have a chip & pin card through Pen Fed. I don't think I've used it in over a year. In fact, its been so long since I've needed it that if I find myself at some out of the way un-manned kiosk in the middle of nowhere where my other cards won't work I'm half certain Pen Fed would decline the charge as fraudulent anyway.

Fortunately, that hasn't been an issue as everywhere I've gone recently accepts my chip and sig card no questions asked. I have a theory that Europe has just decided to honor the U.S.'s lack of security features because, hell, it's the American bank's problem if the transaction is fraudulent anyway.

 

[Gone4Good]

My experience with the Schwab Bank debit VISA is that the date of the ATM withdrawal determines the VISA rate I get. Of course VISA sets this based on the prior day's higher interbank exchange rate.

But there is no delay to post the transaction like there is for my credit cards.

It shows up immediately in my account, and does not change.

That's probably true. I've typically not monitored the ATM transactions as closely because I really don't pay for anything in cash unless I have to. So my comment may not (or may) apply to cash withdrawals. It definitely applies to my Chase credit card purchases, though.

 

[Gone4Good]

But in the 90s I used to be able to go to my local AAA office, buy American Express Travelers checks, then find a local American Express office and get a quite decent local exchange rate. Keep track of my checks as cashed so that if something happened to the checks I would get reimbursed. I felt quite secure doing it this way.

Long gone now.

P.S. I still remember a million lira hotel bill. Fortunately that was a company expense.

Wow, really? I'd have though that AmEx would have totally abused folks back then. I mean, hell, folks are still taking 20% on each side of travelers FX exchange today when there are so many lower cost options around. I'm stunned to hear that AmEx wasn't taking at least as much when there were far fewer alternatives.

P.S. If you want hotel bills denominated in millions you can always head to Vietnam (which I'd recommend anyways) where the the rate is around 22,000 to 1.

 

[audreyh1]

Wow, really? I'd have though that AmEx would have totally abused folks back then. I mean, hell, folks are still taking 20% on each side of travelers FX exchange today when there are so many lower cost options around. I'm stunned to hear that AmEx wasn't taking at least as much when there were far fewer alternatives.

They offered lots and lots of card member perks back then.

 

[OldPro]

OK audreyh1, I now buy that you have it right based on reading the bankrate.com quote you found to support your belief.

You quoted bankrate.com and I would appreciate if you could post the link to that page you quoted from. It would be handy for me to have when on other travel sites where someone asks about the Visa 1%.

As I wrote, I am happy to have got it wrong. Having the 1% eaten makes 'no transaction fee' all that much better for US card holders. Now they just have to get the chip and PIN part right.








Quote:

Credit card foreign transaction fees
Capital One
Issuer fee: none.
MasterCard/Visa fee: 1%; absorbed by Capital One
Total: 0%
unless it's accurate.

 

[audreyh1]

OK audreyh1, I now buy that you have it right based on reading the bankrate.com quote you found to support your belief.

You quoted bankrate.com and I would appreciate if you could post the link to that page you quoted from. It would be handy for me to have when on other travel sites where someone asks about the Visa 1%.

As I wrote, I am happy to have got it wrong. Having the 1% eaten makes 'no transaction fee' all that much better for US card holders. Now they just have to get the chip and PIN part right.

Quote:

Credit card foreign transaction fees
Capital One
Issuer fee: none.
MasterCard/Visa fee: 1%; absorbed by Capital One
Total: 0%
unless it's accurate.

That bankrate.com quote with link was originally in my reply to you in post #32
Credit Card Foreign Transaction Fee Chart | Bankrate.com

Capital One was the most vocal US bank at first to advertise their no foreign transaction fees credit cards, and it must have been a big selling point, because most major US credit card issuers eventually came out with one or more cards that provided the same feature.

 

[kcowan]

Does it say something about our society when we all look for (including myself) the 'sound bite' to tell us the story? If it doesn't fit in a 'tweet' or a 15 second TV news segment, it's too long.

Back when email came to the market in the early 90s, I found that many of my direct reports would only deal with the first issue in an email. So I don't think it is a new phenomenon. And I also read all your posts because it as an old habit.

 

[kcowan]

Currency exchange rate fees the banks are hiding from you

Thanks Meadbh. We found that TD would charge a $5 Plus exchange fee and a 2.5% Vig on foreign debit transactions.

So we found that the Chase Visa would give us cash advances for 1% of the amount withdrawn (minimum $5) and was accepted everywhere in Europe. So we would make a w/d, say 500 euros, then pay off the balance to avoid interest charges. It worked well in Turkey and Sicily.

 

[OldPro]

That bankrate.com quote with link was originally in my reply to you in post #32
Credit Card Foreign Transaction Fee Chart | Bankrate.com

Capital One was the most vocal US bank at first to advertise their no foreign transaction fees credit cards, and it must have been a big selling point, because most major US credit card issuers eventually came out with one or more cards that provided the same feature.

That's the first site I've seen that actually breaks out the issuer/Visa fee separately audreyh1. Very useful site to direct people to who are looking for what card to use.

 

[OldPro]

Back when email came to the market in the early 90s, I found that many of my direct reports would only deal with the first issue in an email. So I don't think it is a new phenomenon. And I also read all your posts because it as an old habit.

Back when e-mail came to the market, I was already retired kcowan.

 

[audreyh1]

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/consumer/travel-support/exchange-rate-calculator.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!!!
**http://www.flyertalk.com/forum/cred...xchange-rates-discussion-forex-all-cards.html

 

[audreyh1]

Oh Good - here is someone who demonstrates essentially no difference and no consistent advantage:
Foreign Exchange Rates - VISA vs. MasterCard vs. Amex - Hungry for Points

 

[braumeister]

As long as there's no foreign transaction fee, these conversion factor differences are down in the noise level for me.

For example, some Visa purchases I made in France in Euros earlier this month converted to US$ at a 1.129411764 factor.
The rate quoted for that day on XE.com was 1.1252539629.
That gave the Visa folks just over 2/5 of a cent per Euro, and they're welcome to it.

However, it's definitely important to be aware of this issue.

 

[audreyh1]

I think several folks on FlyerTalk had convinced themselves that MC had an edge by 1% over VISA when it came to conversion rates. Partly because of the belief that MC uses something closer to the mid-market rate as seen on XE.com for a given day. Whereas VISA seems to choose a max value from the day before (worst).

But I think some can be attributed to maybe a 1 day delay in comparisons - something that averages out in the long run. Also it's easy to get off due to rounding errors on small purchases.

Anyway - someone who had 150 transactions in several different parts of the world usually several different cards in 2015 found that there was no absolutely consistent difference and the cards were usually within 0.1% of each other. In other words - yes, noise.