Credit card Forex - Spot price, or daily set prices?

[EugW]

I was just wondering how credit card companies in Canada usually determine their forex / US dollar currency conversion prices. Is it just the spot price plus commission, or is it set (fixed, based on the spot price) at arbitrary times of the day?

P.S. Today seems like a good day to pay for a few large US$ purchases I had in the queue. The US dollar is dropping through the floor.

[rf134a]

It looks like spot @ time of transaction + commission (1.8% - 3%). I've made 2 purchases within 5 minutes of each other and each transaction had a different rate on my Visa. It was only 12 pips, but that tells me that their system updates very frequently and Visa doesn't lose out on forex.

[asdfvcx]

I don't know if it's spot or daily.

However, it's based on time the item posts to your account, not the time of your transaction. So even though you make two transactions within minutes, it would be quite common for them to post on different days.

[EugW]

Interesting thanks.

I made some payments yesterday and they should post to the account by tomorrow. Hopefully the CAD$ won't drop too far in the next couple of days.

BTW, I got the invoice for one item when the CAD$ was still in the 80s. Luckily they allowed me to delay payment. Saved me a 3-digit CAD$ amount. Best time would have been late October though.

As for close transactions posting on different days, shouldn't you just be able to tell by the date listed on the monthly statement?

[tng11]

It is based off the spot price- different posting times can have an effect on the exchange rate. Normally it is Visa/Mastercard's rate which is the spot rate+1% and then the bank's markup of 2.5% applied on top of that. I've had transactions that posted on the exact same day but the exchange rate was 1% different between them, apparently that was because the CAD fell 1% in the few hours between the transaction posting.

ATM withdrawals are a different story- they are based off daily rates set in the morning. One time I withdrew USD late in the afternoon at slightly below spot because the USD had shot up during the morning.

[EugW]

The amount posted today. I got a rate of CAD$1 = US$0.9181 (including commission).

On Monday when the transaction was done, the spot rate was probably US$0.945. This morning the spot rate was probably around US$0.955ish.

So, if the transaction time is when they base the conversion rate then it's around 3% total commission, but if it's based on the posting date, then the commission is probably closer to 4%ish.

[simms]

spot + 2.5% on most cards.

[EugW]

spot + 2.5% on most cards.
So that would suggest it's probably based on the transaction time as opposed to the final posting time then on my AmEx )(since two days ago currency conversion rates would suggest a <3% commission, whereas today it would mean a 4% commission).

[bcbgboy13]

The amount posted today. I got a rate of CAD$1 = US$0.9181 (including commission).

On Monday when the transaction was done, the spot rate was probably US$0.945. This morning the spot rate was probably around US$0.955ish.

So, if the transaction time is when they base the conversion rate then it's around 3% total commission, but if it's based on the posting date, then the commission is probably closer to 4%ish.

Not sure where you got your data but this is the history for the last two days:

Date Open High Low Close
Tue, Nov 10 2009, 12:00 GMT 0.947 0.953 0.9424 0.9521
Mon, Nov 9 2009, 12:00 GMT 0.9323 0.948 0.9299 0.9467

[asdfvcx]

According to my actual AMEX bill:

They use interbank rates plus 2.5%
They use the rate from the business day prior to the processing date.


I expect processing date is the same as posting date, although I'm not sure. The front of my bill lists the transaction and posting dates for each charge. And the fine print on the explanation in the back of my bill mentions processing dates. Nicely confusing.

[EugW]

Not sure where you got your data
I was checking the spot prices at random times during the day, just for my own interest.

P.S. Today is the 11th, and the rate is well over 95 cents now.


According to my actual AMEX bill:

They use interbank rates plus 2.5%
They use the rate from the business day prior to the processing date.


I expect processing date is the same as posting date, although I'm not sure. The front of my bill lists the transaction and posting dates for each charge. And the fine print on the explanation in the back of my bill mentions processing dates. Nicely confusing.
Hmmm... Interesting. So it might make more sense to wait a day after a big move in currency rates before purchasing (if the move is in your favour). If so then... Doh!

[asdfvcx]

Hmmm... Interesting. So it might make more sense to wait a day after a big move in currency rates before purchasing (if the move is in your favour). If so then... Doh!
Except if processing date means posting date, you run into the problem that you never are exactly sure when the posting date will be.

[EugW]

The amount posted today. I got a rate of CAD$1 = US$0.9181 (including commission).
Oops. The statement showed it actually posted the same day. It just didn't show up in my account until two days later.

I did two US transactions on Nov. 9 timed relatively close to each other. According to the records, although they showed up later, one posted on Nov. 9 and one posted on Nov. 10.

The exchange rate on both is basically identical, at US$0.91814. So, this seems to confirm it's not the posting date that matters, but the transaction date, at least with AmEx. (Otherwise, the rate on Nov. 10 would have been better, since the currency conversion rates changed relatively significantly over those few days.)

[Sanchez]

Normally it is Visa/Mastercard's rate which is the spot rate+1% and then the bank's markup of 2.5% applied on top of that.

There is really an additional markup of 1% by Visa/MC on top of the 2.5% charged by the card issuer? That would be news to me - do you have a reference?

I had understood it was just the 2.5% on top of the actual market rate obtainable by Visa/MC which on the interbank market is going to be basically spot (maybe a pip or to different).

If the total markup is really 3.5% then these strategies of using a USD card and coverting the money elsewhere start to make sense (even if you lose the rewards and pay 1% to convert).

[tkyoshi]

There is really an additional markup of 1% by Visa/MC on top of the 2.5% charged by the card issuer? That would be news to me - do you have a reference?

I had understood it was just the 2.5% on top of the actual market rate obtainable by Visa/MC which on the interbank market is going to be basically spot (maybe a pip or to different).

If the total markup is really 3.5% then these strategies of using a USD card and coverting the money elsewhere start to make sense (even if you lose the rewards and pay 1% to convert).

Yes it is pretty standard, your card agreement should state something to the effect that the exchange is based off the rate set by VISA/MC International (which includes the 1%) plus the Forex currency fee (2.5%).

[Sanchez]

Yes it is pretty standard, your card agreement should state something to the effect that the exchange is based off the rate set by VISA/MC International (which includes the 1%) plus the Forex currency fee (2.5%).

Yeah, but it is contrary to the conventional wisdom that the total markup is 2.5%, and also contrary to some examples and opinions even in this thread, so I wouldn't consider the matter settled. The two days I checked for recent foreign purchases came in at 1.8% and 3.3%, so inconclusive, I guess.

[Sanchez]

Yes it is pretty standard, your card agreement should state something to the effect that the exchange is based off the rate set by VISA/MC International (which includes the 1%) plus the Forex currency fee (2.5%).

After some checking, this appears to be false (http://www.redflagdeals.com/forums/mbna-smart-cash-currency-conversion-fee-818169/#post9843559) - or else the assumptions of using the posting date are wrong (which I doubt), at least for MBNA SmartCash MC (although I doubt it varies among card issuers of the same type).

[tkyoshi]

After some checking, this appears to be false (http://www.redflagdeals.com/forums/mbna-smart-cash-currency-conversion-fee-818169/#post9843559) - or else the assumptions of using the posting date are wrong (which I doubt), at least for MBNA SmartCash MC (although I doubt it varies among card issuers of the same type).

I wouldn't come out an say it's just plain false. Each credit card issuer has a choice of what they want to pass on.

I was giving a general overview of what typically happens.

Card issuers always have the following options:
1) VISA/MC International set their rate and add 1% - This is what they charge the bank

2) The bank then can either just pass this rate onto you or add their own markup so they can generate revenue as well.

The bank has flexibility on what they want to charge you. If they want to make it approximately 2.5% then they will just add an extra 1.5% ontop. They can even charge nothing where then your effective rate is just the VISA/MC 1% (rare but there are a couple cards floating around - some old Cap 1 card offered this).

Most banks will typically apply 2.5% ontop of VISA/MC's rate, for US Issued cards, most banks will add 3% ontop of VISA/MC's rate. These numbers given by me and tng11 are general average numbers for most cards.

The posting/processing date also plays some role in the variability. Another example is BMO, the system updates approximately every hour so occasionally when the CAD drops say 1-1.5 cents within an hour it is not reflected right away. So people changing money are actually getting a "better" rate relative. The bank's goal is to charge you approximately 3% over the counter but due to system delays sometimes people are getting lower %'s.

[Sanchez]

I wouldn't come out an say it's just plain false. Each credit card issuer has a choice of what they want to pass on.


Note that I said that it is "false ... in the case of the MBNA SmarCash" (emphasis mine).


I was giving a general overview of what typically happens.

Card issuers always have the following options:
1) VISA/MC International set their rate and add 1% - This is what they charge the bank

2) The bank then can either just pass this rate onto you or add their own markup so they can generate revenue as well.

The bank has flexibility on what they want to charge you. If they want to make it approximately 2.5% then they will just add an extra 1.5% ontop. They can even charge nothing where then your effective rate is just the VISA/MC 1% (rare but there are a couple cards floating around - some old Cap 1 card offered this).

Most banks will typically apply 2.5% ontop of VISA/MC's rate, for US Issued cards, most banks will add 3% ontop of VISA/MC's rate. These numbers given by me and tng11 are general average numbers for most cards.


OK, but then the 2.5% mentioned by the card issuer is which value? Your claim is that it is on top of the rate offered by Visa/MC international. MBNA also uses the same 2.5% figure. Yet we can see that the total spread for a purchase on an MBNA card is between 2% and 2.9%, so clearly the 2.5% is not on top of a 1% spread added by Visa/MC international.

So you can't simply claim that every issuer does it differently, but also that they also also mean completely differently things when they say "2.5% surcharge (or whatever terminology they use)" - because nearly all issues use the same language and that same number - 2.5%. We've seen that for at least one issuer, this is close to the actual total spread, but other issuers mean something different? I would think that MBNA would prefer to say 1.5% if they were really only changing that (with the other 1% coming from the Visa/MC international markup), since that would be a competitive advantage compared to all those cards which change 2.5% on top of that 1%.

I suspect, instead, that you are simply mistaken, and that 2.5% is really close to the total spread for the issuers that claim a 2.5% spread. Whether that is composed of 1% to Visa/MC intenational and 1.5% to the issuer, or some other breakdown, isn't really material to the end user.

The posting/processing date also plays some role in the variability. Another example is BMO, the system updates approximately every hour so occasionally when the CAD drops say 1-1.5 cents within an hour it is not reflected right away. So people changing money are actually getting a "better" rate relative. The bank's goal is to charge you approximately 3% over the counter but due to system delays sometimes people are getting lower %'s.

Yes, but that's why I used the maximum and minimum points reached by CAD.EUR over the day. The worst case spread was 2.9% (if it was processed at the absolute worst time during the day, a period which lasted for a minute or two).

[tkyoshi]

Note that I said that it is "false ... in the case of the MBNA SmarCash" (emphasis mine).

So you can't simply claim that every issuer does it differently, but also that they also also mean completely differently things when they say "2.5% surcharge (or whatever terminology they use)" - because nearly all issues use the same language and that same number - 2.5%. We've seen that for at least one issuer, this is close to the actual total spread, but other issuers mean something different? I would think that MBNA would prefer to say 1.5% if they were really only changing that (with the other 1% coming from the Visa/MC international markup), since that would be a competitive advantage compared to all those cards which change 2.5% on top of that 1%.

I suspect, instead, that you are simply mistaken, and that 2.5% is really close to the total spread for the issuers that claim a 2.5% spread. Whether that is composed of 1% to Visa/MC intenational and 1.5% to the issuer, or some other breakdown, isn't really material to the end user.


Note that I said that it is "false ... in the case of the MBNA SmarCash" (emphasis mine).


In your case, in order to accurately determine we would need more datapoints. Just 1 transaction is not enough information to calculate the spread. I'm glad yours turned out for the better but just 1 case is not enough.

Sigh.....

===============

The additional markup in any of these cases are 2.5% OVER the rate set by V/MC Intl. I don't have all day to scan every agreement which basically says the same thing but here you go. MBNA does not make their full agreement available online (I can't find my paper copy right now), but the language is essentially the same. Some issuers will describe "Rate Schedule" in which when you look it up, it is typically 2.5% (on top of V/MC Intl Rate).

CIBC:
VISA International converts all foreign transactions to Canadian funds at a preferred exchange rate. All transactions, including credits are also subject to an additional administration fee, presently at 2.5%. This fee is to offset the costs incurred by VISA International and CIBC in offering a worldwide VISA service. It is important to note that a foreign currency transaction is a more expensive transaction than a domestic transaction. Below is an example of the conversion calculation:

Scotia:
For cards, debit or credit vouchers in a foreign currency are charged orcredited to your account at the exchange rate determined by VISA
International on our behalf. This exchange rate may be different from the
rate in effect on the transaction date. This rate includes an amount equal
to a percentage of the converted amount, in Canadian currency, disclosed
from time to time in your Monthly Statement, applied to both
debit and credit transactions.

RBC:
Foreign Currency Transactions
We will bill you in Canadian currency. If you or your Authorized Users use a Visa Card or your Visa Account number outside Canada or charge amounts to your Visa Account in a foreign currency, we will convert the charges into Canadian dollars at our exchange rate which is 2.5% over the base conversion rate set by Visa International in effect at the time we post the transaction to your Visa Account.

BMO:
We convert withdrawals and purchases made in a foreign currency to Canadian dollars. We make the conversion at our exchange rate, which is 2.5% over the rate set by MasterCard International Inc (which runs the Cirrus and Maestro networks available using your Card) on the date the transaction is posted to your account. The conversion rate may not be the same as the rate that was in effect on the transaction date

PCF:
18.1 If you make purchases or take cash advances in a foreign currency, you will be charged in Canadian dollars at the exchange rate in effect at the time we post the transaction to your Account. If you return any such purchases, you will receive a credit in Canadian dollars at the exchange rate in effect at the time we post the return to your Account. As a result, the amount of the purchase and the refund may differ if the exchange rate has changed. If the amount of the refund is less than the amount of the purchase, you will be required to pay the difference. The exchange rate used consists of the MasterCard International Incorporated conversion rate and the foreign currency conversion markup percentage for transaction handling.

TD:
http://members.shaw.ca/teamawesome/TD.PNG

[Sanchez]

In your case, in order to accurately determine we would need more datapoints. Just 1 transaction is not enough information to calculate the spread. I'm glad yours turned out for the better but just 1 case is not enough.

Do you think that 1 data point is enough to establish a range, at least? If not, why is 1 data point not enough - is there a random factor being added by someone somewhere? In any case, 1 data point is better than the real life examples of being charged 3.5% that you've provided.

Still I'm definitely interested in more data points - maybe I'll collect some later, or perhaps others can post recent foreign purchases, with posting date, the amount in the foreign currency, the amount charged in CAD, and we can take a look.


The additional markup in any of these cases are 2.5% OVER the rate set by V/MC Intl. I don't have all day to scan every agreement which basically says the same thing but here you go. MBNA does not make their full agreement available online (I can't find my paper copy right now), but the language is essentially the same. Some issuers will describe "Rate Schedule" in which when you look it up, it is typically 2.5% (on top of V/MC Intl Rate).

...

I don't disagree with what the agreement says - I've read it myself more than once, and I agree also that the MBNA agreement is virtually the same.

What I'm saying is that it's surprising and contrary to conventional wisdom that this means 1% + 2.5%. The text provides no support that the "rate established by Visa/MC international" is anything other than a mid-market or market ask (nearly mid-market). My test agrees with this. So I'm asking for some backup of your statement that there is an additional hidden, fees imposed by VC/MC international whose value isn't disclosed in the agreement.

Additional evidence against your interpretation is that other cases where the spread of a transaction (e.g., at a discount broker, paypal, online payment processor, POS terminal, etc) has been described as x% on top of some "rate determined by entity XYZ", that rate has basically been some type of relatively accurate mid-market or ask rate, and did not incorporate an additional hidden spread.

Final note - the Scotia agreement is the only one that directly implies that the Visa/MC international rate has a hidden spread (the "This rate includes an amount equal
to a percentage of the converted amount") - but this one doesn't even mention the 2.5% at all, and says that this rate will be disclosed on your statement and from time-to-time - well I suspect that this rate will be disclosed to be 2.5%, just like all the cards, implying that the total take is 2.5%. I can't check myself since I don't have any Scotia cards.

[tng11]

Earlier this year, I did a comparison and have more datapoints to compare from AMEX, CIBC and RBC as well as using ATMs for Citizens and TD.

http://www.redflagdeals.com/forums/foreign-exchange-comparison-atms-credit-cards-759593/

I would still say the analysis I did above was inconclusive as I only used the closing rates to compare and most transactions ended up being below 2.5%.

FX markup on credit cards/ATM transactions have proved to be quite unpredictable at most banks around the world. I have tried foreign currency cards from the UK, HK, the US which all have different policies (they range from 2.75% over MC rates to 0% forex fee) and there has always been a discrepency between their ToAs and what actually gets posted on my statement, sometimes in my favour, sometimes not. I've tried using my US HSBC Mastercard for non-USD transactions and it sometimes charges the interbank rate and sometime can be up to 1% more expensive than the highest interbank rate on any particular date.

tkyoshi is definitely correct that the ToAs of most banks state it is a 2.5% markup on top of the Visa/MC rate which has a 1% fee built in already but even with CIBC which clearly states that, the FX fee has worked out to less than 2.5% with a few different data points.

[Sanchez]

Finally, here is a direct quote from Visa.com (http://usa.visa.com/personal/using_visa/exchange_rates_faq.html):

Every day—except weekends, Memorial Day, Christmas Day and New Year's Day—Visa calculates the rate for the next day's transactions. The Visa rate is selected from a range of rates available in wholesale currency markets or the government-mandated rate in effect one day prior to the applicable central processing date. Visa makes this rate available to issuing banks, which may adjust the rate when billing cardholders by applying a foreign transaction fee. The rate Visa makes available to issuing banks may vary from the rate Visa itself receives. Most consumers find that using Visa is a convenient and cost-effective way to make purchases and obtain cash when traveling internationally.

That is very explicit - the rate offered by Visa to the issuer is the actual "market" rate (i.e., nearly mid-market) or government rate (mid-markt) - there is no spread added. The entire spread is the markup applied by the issuer.

Later on they mention that they change 0.15%-1% to process some types of international transactions, but that this isn't charged to the cardholder or incorporated in the spread. The issuer pays it. Of course, the issuer is happy to pay it since they are raking in 2.5% which is already plenty.

The description also refutes your assertion that the rate is dynamic - depending on the exact time. It explains that rates are set for a full day. I've only looked at Mastercard's behavior on my own cards in this area, and I would say that the evidence is "mixed".

[tng11]

Here's some datapoints that I got from the last few months:

HSBC Premier Mastercard (lists 2.5% + MC rate and I'm using posted dates):

August 4- USD21.51 purchase converted to $23.93 with a USD/CAD rate of 1.1125 and the day high/low was 1.0767/1.0670 from the BOC website, representing a 3.32% and 4.26% fee in the two scenarios.

September 18- USD24.95 converted to $26.63 with a USD/CAD rate of 1.06733 and the day high/low was 1.0744/1.0663 representing a -0.65% and 0.09% fee in the two scenarios.

MBNA Smart Cash:

July 16- USD4.95 converted to $5.75 with a USD/CAD rate of 1.16162 and the day high/low was 1.1206/1.1125 representing a 3.66% and 4.42% fee in the two scenarios.

July 18- USD6.38 converted to $7.32 with a USD/CAD rate of 1.14733 and the average high/low 1.1146/1.1084 representing a 2.94% and 3.51% fee in the two scenarios.

So I am led to believe there is lag in updating the rates whether it is on Mastercard or the bank's side. The same card used on close dates can have quite a range of forex fees.

[tkyoshi]

Finally, here is a direct quote from Visa.com (http://usa.visa.com/personal/using_visa/exchange_rates_faq.html):



That is very explicit - the rate offered by Visa to the issuer is the actual "market" rate (i.e., nearly mid-market) or government rate (mid-markt) - there is no spread added. The entire spread is the markup applied by the issuer.

Later on they mention that they change 0.15%-1% to process some types of international transactions, but that this isn't charged to the cardholder or incorporated in the spread. The issuer pays it. Of course, the issuer is happy to pay it since they are raking in 2.5% which is already plenty.

The description also refutes your assertion that the rate is dynamic - depending on the exact time. It explains that rates are set for a full day. I've only looked at Mastercard's behavior on my own cards in this area, and I would say that the evidence is "mixed".

What it comes down to is you want to know about the "Hidden" additional markup by VISA/MC they generally will NOT put it in writing because it's part of their business model. This extra charge is commonly refered to as the "hidden fee".

It's just like them saying oh we charge % to every customer that falls within this category (i.e. Merchant Accounts). It is proprietary information that will not be disclosed to you. I understand that you want it in writing but simply it isn't possible, it's like asking everyone to disclose everything about their business.

For example people asking how Equifax calculates your credit score. While there is some general info on how many % approximate something may affect you Equifax will never tell you their actual critieria.

Or even asking how Starwood ranks it's criteria for upgrade suggestions to Elite Members. Sure the T&C say every Platinum should receive the "best room" or what not, but there is still some formula that is used in the background.

And if course VISA/MC will NOT tell you they skim off another 1%, because it would make their product less attractive to the consumer. If you dig deep enough you will find the info but they won't readily disclose it to you. They want it to make it seem that it's the *issuing bank* that charges it..

But there are some various articles floating around that discuss this, but you won't get the answer direct from the horses mouth.

The bottom line is Visa/Mastercard are in this business to make money, not be a forex broker with no commission. They make a % off the conversion and % of the transaction fee, they do not lend so they can't make money off outstanding debt or annual fees. It's just their business model.

=================

Most major credit-card issuers that have increased fees have added a 2 percent markup to Visa and MasterCard's 1 percent currency-conversion fee.
http://money.aol.com/consreports/smartshopping/personal_finance?id=20051111140809990001

Visa and MasterCard levy 1-percent currency-exchange fees on transactions made abroad. The card associations bill the issuers, and many issuers, in turn, bill customers.


http://www.bankrate.com/brm/news/cc/20010416a.asp

Credit card charges, foreign currency

When you use a credit card outside the US, your charge will normally be in the currency of the country you're visiting. When that charge goes through the system and reaches your bank, most US banks still tack their own surcharges onto the standard 1% charged by the international networks. This is essentially for doing nothing, because the charge is already in US dollars by the time your bank receives it: The bank adds the 2% because it can, out of pure greed.


http://www.usatoday.com/travel/deals/inside/2009-05-21-best-overseas-credit-card_N.htm

Breaking down the fees
Visa and MasterCard, which handle the transactions between the merchant and the bank that issued your card, each charge a 1 percent foreign transaction fee. However, most card issuers that use the Visa and MasterCard payment system add their own fees on top of that. If you have a Bank of America MasterCard, for example, you'll pay the 1 percent MasterCard charges plus an additional 2 percent levied by Bank of America, for a total of 3 percent.

http://www.creditcards.com/credit-card-news/foreign-exchange-fees-going-up-1267.php


Good question. I asked Michael Sherman, a vice president for Visa International to explain the percentages.
...
Sherman told me that Visa offers currency rates to its member financial institutions at a wholesale market rate plus one percent of the transaction amount. Your issuing bank then decides whether to absorb that cost or to pass on its currency conversion costs to the cardholder, and it may or may not mark up the rate it receives from Visa.

http://www.elliott.org/the-troubleshooter/how-does-visas-exchange-rate/

=======================

I'm sorry if you are still not happy with this, there's probably not much more we (me and tng11) can discuss, our goal is not to pick a fight with you, but just help you :)

[Sanchez]

I'm not interesting in fighting for fighting's sake either, but lets get to the bottom of it.

I know that Equifax isn't going to release their secret sauce. I don't see how that relates to the material posted on the Visa site. They are explicit in the rate they charge issues - are you saying they are lying? There is a big difference between "not revealing how we do it" and "straight out lying about how we do it".

Even many of your quotes support what I'm saying: "Visa and MasterCard levy 1-percent currency-exchange fees on transactions made abroad. The card associations bill the issuers, and many issuers, in turn, bill customers."

The key is that the charge is separate from the reference rate used by Visa/MC international, and is paid by the issuer. Of course, an issuer charging their 2.5% spread isn't going to have a problem paying a 1% or less spread out of that. So the model being described there is a total markup of 2.5% from a reference (market) rate, out of which the issuer pays the fee to Visa/MC fee.

Direct from Visa:

Visa Inc. does not assess any fees to cardholders or merchants. Visa applies International Service Assessment (ISA) fees ranging from 0.15 to 1 percent to its financial institution partners for their use of the global payment system.

The fees are paid by financial institutions on transactions that require the use of our global infrastructure. Since Visa does not assess any fees to cardholders or merchants, we have no involvement in financial institution pricing to cardholders or merchants. If financial institutions or merchants decide to assess a foreign transaction fee to their customers, they are required to provide details to their cardholders and consumers.

As part of Visa’s international functionality, Visa has offered international processing services to its financial institutions for more than twenty years. Over the years, Visa has become a symbol of international acceptance, and Visa views its global support services as paramount to providing its cardholders with superior value and benefits.

They are pretty clear here. Yes, we charge the issuer a fee which varies between 0.15% and 1% for any cross-border purchases. This is separate from the foreign exchange rate discussed above. The issuer may choose to recoup this fee by charging their own fee on such purchases. This issuer imposed fee must be disclosed. The issuer disclosed fee could then be used to cover the international processing fee charged by Visa, but is not somehow "on top of" this fee.

[Sanchez]

http://www.elliott.org/the-troubleshooter/how-does-visas-exchange-rate/

=======================

I'm sorry if you are still not happy with this, there's probably not much more we (me and tng11) can discuss, our goal is not to pick a fight with you, but just help you :)

I wanted to address this one specifically, because it also supports my point - yes, Visa does (did) offer to exchange currency for issuers at 1% above the reference rate, but it is still that reference rate from which the 2.5% is calculated! See this other post (http://www.elliott.org/power-trip/a-mysterious-currency-fee/) from the same site:

It isn’t just the credit-card companies that have their fingers in your pocketbook. The big banks do, too. Wells Fargo, which issues my Visa card, will tack a 3 percent charge for handling the currency conversions during my trip to Europe this summer (returning 1 percentage point of that to Visa). Not a bad way to make a quick buck for an industry that pays just 1.5 percent for a three-month certificate of deposit.

Note the fact that the 1% charged by Visa is included in the 3% markup from the reference rate. Note also that Visa has apparently suspended the 1% markup too, meaning that card issuers can take even more for themselves, temporarily.

[Sanchez]

Here's some datapoints that I got from the last few months:

HSBC Premier Mastercard (lists 2.5% + MC rate and I'm using posted dates):

August 4- USD21.51 purchase converted to $23.93 with a USD/CAD rate of 1.1125 and the day high/low was 1.0767/1.0670 from the BOC website, representing a 3.32% and 4.26% fee in the two scenarios.

September 18- USD24.95 converted to $26.63 with a USD/CAD rate of 1.06733 and the day high/low was 1.0744/1.0663 representing a -0.65% and 0.09% fee in the two scenarios.

MBNA Smart Cash:

July 16- USD4.95 converted to $5.75 with a USD/CAD rate of 1.16162 and the day high/low was 1.1206/1.1125 representing a 3.66% and 4.42% fee in the two scenarios.

July 18- USD6.38 converted to $7.32 with a USD/CAD rate of 1.14733 and the average high/low 1.1146/1.1084 representing a 2.94% and 3.51% fee in the two scenarios.

So I am led to believe there is lag in updating the rates whether it is on Mastercard or the bank's side. The same card used on close dates can have quite a range of forex fees.

Interesting. I will have to check out more of my foreign purchases to see if a pattern emerges. I agree that one data point doesn't seem to be enough.

[halflife150]

Sanchez beat me to it!

What it comes down to is you want to know about the "Hidden" additional markup by VISA/MC they generally will NOT put it in writing because it's part of their business model. This extra charge is commonly refered to as the "hidden fee".

I'm sorry if you are still not happy with this, there's probably not much more we (me and tng11) can discuss, our goal is not to pick a fight with you, but just help you :)

Actually a quick look at one of your links I think proves Sanchez right and you wrong.

http://www.creditcards.com/credit-card-news/foreign-exchange-fees-going-up-1267.php

According to that site you provided, BofA and Chase each charge a total 3% which is comprised of 1% from VISA/MC and 2% from the Bank. Go to BofA and Chase sites and they disclose in terms they charge a 3% fee. So that forex fee includes the 1% from VISA/MC and therefore is not hidden or on top of.

Based on the above, a 2.5% exchange fee is made up of 1% VISA/MC and 1.5% from the bank. A 0% fee means the bank would eat the 1% Visa/MC fee. So the very links you provide to prove you right seem to suggest the opposite. I guess you either have to reject your sites as wrong making your argument proof-less, or agree they are right and side with Sanchez.

[tkyoshi]

Sanchez beat me to it!



Actually a quick look at one of your links I think proves Sanchez right and you wrong.

http://www.creditcards.com/credit-card-news/foreign-exchange-fees-going-up-1267.php

According to that site you provided, BofA and Chase each charge a total 3% which is comprised of 1% from VISA/MC and 2% from the Bank. Go to BofA and Chase sites and they disclose in terms they charge a 3% fee. So that forex fee includes the 1% from VISA/MC and therefore is not hidden or on top of.

Based on the above, a 2.5% exchange fee is made up of 1% VISA/MC and 1.5% from the bank. A 0% fee means the bank would eat the 1% Visa/MC fee. So the very links you provide to prove you right seem to suggest the opposite. I guess you either have to reject your sites as wrong making your argument proof-less, or agree they are right and side with Sanchez.

Well I mean at this point maybe me and Sanchez will just have to go our separate ways.

It is my fault for bringing in US information so I did kind of shoot myself there. It does work differently down there, the agreements down there just state a "foreign conversion fee" and this includes the VISA/MC fee.

However did you know that if you are charged in USD foreignly, the "Foreign Fee" still applies for US cards? This means if you bought from a retailer located outside of the US but bills in USD you still get assessed the fee even though no conversion has taken place. This is why the fee can be seen as "blended" or more transparent when incorporating the VISA/MC rate.

What this means is for US Cards like Citibank, BOA, or Chase:
- If forex is involved you get the (1% (V/MC) + 2% ("The Bank") = 3%
- If USD but charged from a foreign country then it is 3% ("The Bank") so a $100 Foreign USD Charge becomes $103USD.

The 3% fee is the same whether a foreign conversion takes place or not. Alsosome banks like BOA it will show "Foreign Transaction Fee" on a separate line under the charge.

Foreign Transactions: Transaction Fee for any transaction made in a foreign currency and any transaction made in U.S. Dollars that is processed outside the United States: 3% of the U.S. Dollar amount of each such transaction. This fee will be in addition to any other applicable fee.

Regardless if maybe some others want to chime in that would be great, if everyone thinks I am wrong then well I will keep quiet on this matter then!

[Sanchez]

Regardless if maybe some others want to chime in that would be great, if everyone thinks I am wrong then well I will keep quiet on this matter then!

It's not really about being right or wrong (OK, everything else being equal, I would prefer to be right...) but rather about finding out what the real surcharge is. I want to know what it is so I can make the right spending decisions. I'm arguing one way because to me the evidence (and conventional wisdom) points that way, but if I'm wrong, so be it.

We'll need to take a look at more data points, I guess...

[tkyoshi]

It's not really about being right or wrong (OK, everything else being equal, I would prefer to be right...) but rather about finding out what the real surcharge is. I want to know what it is so I can make the right spending decisions. I'm arguing one way because to me the evidence (and conventional wisdom) points that way, but if I'm wrong, so be it.

We'll need to take a look at more data points, I guess...

I think that would be best, we can work together to figure this out :cool:

I think based on poorly worded agreements and such we will probably never get anywhere as we can see from the last page of this thread. But hey since when are contracts and agreements written in easy to understand language :lol:

Also if you are doing more forex stuff, you can also try using this in gathering date. Like anything we'll never get the exact amount, but it will help you get an approximation.

http://www.xe.com/ccc/

===================
Just a Hypothetical example using the info given in your other thread:

Credit Card Charges Results Print

Date on transaction receipt: November 25, 2009

Amount on transaction receipt: 25.50 EUR

Mid-market rate for EUR to CAD on 2009.11.25:
(Excluding bank charges) 1.58469

Value of transaction in your currency:
(Excluding bank charges) 40.41 CAD

Amount shown on credit card statement: 41.64 CAD

Your "hidden" fee estimate: 1.04 CAD ( 2.500% )
ACTUAL BANK FEES for this purchase: 1.23 CAD ( 3.045% )

Note: The above fee calculation is based on mid-market rates for the date in question. The fee results are estimated and may vary slightly.

[Sanchez]

Date was 11.27 for that transaction. Ignore what I wrote in the first post, since this was a temp transaction (on 11.25) that disappeared two days later. The temp transaction had no built-in fee (or a very small one) as described in my original post.

The posting date was 11.27.

[Sanchez]

Is anyone aware of any site which provides historical forex (preferably in a form that can easily be imported to Excel), including high/low values for the day?

I hunted around a bit but failed to find anything adequate.

[brunes]

It looks like spot @ time of transaction + commission (1.8% - 3%). I've made 2 purchases within 5 minutes of each other and each transaction had a different rate on my Visa. It was only 12 pips, but that tells me that their system updates very frequently and Visa doesn't lose out on forex.

Its not spot at time of transaction, it is spot at the time of settlement.

You could make transactions within 5 minutes and they could settle 3 days apart.

You can see this in action if your card is with MBNA. Charge something in USD, check your online statement, and you will see the pre-auth has NOTHING with Forex in it. IE, if the purchase was $49.58 USD, the pre-auth will show as $49.58, period. Only a day or two later when it moves into an actual settled transaction will the Forex kick in.

The big banks for some reason don't allow you to see pre-auths in their online statements so you can't see it there.

If you want to know what the surcharge is, just check your CC documentation. It is ALWAYS outlined in your agreement.

[bcbgboy13]

Is anyone aware of any site which provides historical forex (preferably in a form that can easily be imported to Excel), including high/low values for the day?

I hunted around a bit but failed to find anything adequate.

www.fxstreet.com

Here: http://www.fxstreet.com/forex-tools/rate-history-tools/

[brunes]

Is anyone aware of any site which provides historical forex (preferably in a form that can easily be imported to Excel), including high/low values for the day?

I hunted around a bit but failed to find anything adequate.

Just go to finance.google.com and type in CADUSD or USDCAD.

[Sanchez]

You can see this in action if your card is with MBNA. Charge something in USD, check your online statement, and you will see the pre-auth has NOTHING with Forex in it. IE, if the purchase was $49.58 USD, the pre-auth will show as $49.58, period. Only a day or two later when it moves into an actual settled transaction will the Forex kick in.

This wasn't the case for my MBNA SmartCash in EUR - as in my example in another thread (http://www.redflagdeals.com/forums/mbna-smart-cash-currency-conversion-fee-818169/#post9815449) showed, there is forex incorporated even immediately after it posts as a temporary transaction - but this forex doesn't seem to include any spread.

Later, when the transaction settles, the amount changes and a spread is applied. It could be different for USD or other MBNA cards, but that would be surprising.

If you want to know what the surcharge is, just check your CC documentation. It is ALWAYS outlined in your agreement.

Sure, but the main disagreement in this thread is about whether this surcharge incorporates substantially all of the spread above market rates, or if there is an additional hidden 1% surcharge added by MC/Visa international. I'm more or less in the first camp, tng11 and tkyoshi are in the second, and so on.