Credit Card Fees For Foreign Transactions – When Brexit became a reality, the pound fell by 10% at one point to $1.3229 – the weakest against the US dollar since 1985.
This led to British online fashion retailer Asos reportedly collapsing on the same day, with customers trying to take advantage of the pound to shop.
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Or the case of the Swiss National Bank, which rocked the foreign exchange and financial markets on January 15 last year, when it decided to abandon its minimum rate of 1.20 francs against the euro.
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With events like this, and credit card issuers, retailers and travel-related businesses with carrots and sticks to win customers, it’s going to get complicated. Finding out what’s best for a single credit card user.
Sunday Times Invest looks at some common credit card issues, currency conversions and fees, particularly for transactions involving foreign countries.
Personal finance comparison portal SingSaver broke it down, saying that goods purchased in any currency other than the US dollar will be converted first into US dollars and then into Singapore dollars.
The US dollar is the intermediate currency, so converting foreign currency to Singapore dollars usually involves two exchange rates determined by your credit card network.
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SingSaver gives an example: you buy a dress in Europe for €100 and charge a transaction fee to your DBS Visa credit card.
First, Euros are converted into US dollars and then into Singapore dollars. A change would look like this:
After the transaction is converted to Singapore dollars, a foreign transaction fee of 2.5% or more will apply.
DBS notes that all exchanges are based on prevailing interbank wholesale or official rates, as determined by card associations such as Visa, MasterCard and American Express.
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The various fees are confusing when making a transaction at an overseas store, on an overseas website, or on a website that uses a local or overseas payment processor.
You incur foreign currency transaction fees, overseas processed Singapore dollar transaction fees, bank administration fees, and payment network fees.
A United Overseas Bank spokesman said: “Credit card issuers charge an administration fee to facilitate online and overseas purchases.
“Although these fees are nominal relative to the total amount paid, consumers should be aware of the various fees associated with such transactions before making a purchase. The fees can often be found in the credit card’s terms and conditions.”
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A Citibank spokeswoman said different interest rates apply to items such as retail spending, balance transfers or equal payment plans.
“When a bank receives a payment from a customer, it automatically allocates the payment to whichever item has the highest interest rate for the customer’s benefit. This is an industry practice that all Banks have adopted it. Banks in Singapore apply it.”
A Maybank spokesperson said: “Transactions in foreign currencies and processed overseas – regardless of website or physical store – customer purchases are subject to program operators’ banking and administration fees.”
DBS says that all transactions in foreign currencies are subject to fees imposed by the networks – either as a withdrawal fee that represents a charge applied to the bank or directly As a fee charged to the user.
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“Transactions denominated in Singapore dollars and processed overseas – regardless of website or physical store – require customers to bear program operating fees and other potential differences,” said Maybank. The potential markup is not transparent to the card issuer and program operator, but is recognized and accepted by the cardholder at the point of sale in Singapore dollars, the spokesperson said.
SingSaver says different credit cards have different transaction fees, and each bank charges them differently. The three main methods are:
Rohit Murthy, co-founder of SingSaver said: “All goods and services denominated in foreign currencies are subject to foreign transaction fees.
“Such fees are typically charged by both credit card networks such as Visa, MasterCard and American Express and by card issuers.”
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OCBC Bank gives the example of a customer who bought a watch for $100 and chose to pay in foreign currency with their MasterCard. OCBC calculates the following:
• S$135 + S$135 x 2.8 percent = S$138.78, shown in one line on the OCBC statement.
OCBC says it is important to note that the amount owed will not be known to customers until they receive a statement.
It notes that between banks, there will be a bank fee of 1.5 to 2.5%, along with a Visa or MasterCard fee of 1%.
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Maybank also notes that market fees go up to 3.5%, but the bank only charges 2.5% for most cards such as the popular Maybank Family & Friends Card and Maybank Horizon Platinum Visa Card.
OCBC adds: “Transaction posting and settlement dates – known only to traders – affect the applicable exchange rate.”
SingSaver said paying in Singapore dollars would avoid foreign transaction fees, a serious and costly misunderstanding.
Some overseas traders offer the option of transacting in Singapore dollars, and such transactions are known as dynamic currency conversions, where goods are converted from a foreign currency into Singapore dollars.
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“Hence, merchants have an incentive to choose an unfavorable exchange rate to increase profits. In fact, Mastercard has listed flexible currency conversion as a reason for increasing profits for businesses,” Mr. Murthy said. More.
“Earn additional revenue from foreign card transactions by applying commissions typically paid by issuing banks and card associations,” the website says. Other payment networks also list this on their fact sheet or on their website. A 2015 Business Times report said banks also benefit.
Dynamic currency conversion is a common service used by online merchants or foreign websites, so users should be aware.
The Monetary Authority of Singapore and the Singapore Bankers Association also said that card issuers often report that Singapore dollar payments routed through overseas payment processors incur additional fees.
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The payment processor includes big names like PayPal and Alipay, and the New York Times says it acts as a digital courier between card issuers and merchants.
Processors help merchants’ payment terminals communicate with banks by sending signals over electronic highways such as Visa or MasterCard.
OCBC adds that as long as the payment is made overseas, the cardholder will be charged a dynamic currency conversion fee or exchange rate, depending on the currency they choose to pay in. For example, Uber uses flexible currency conversion when paying in the Netherlands, and cardholders are charged in Singapore dollars.
SingSaver added that even if the product is priced in Singapore dollars or when you shop on a website in Singapore – sites ending in .sg – as long as the payment is processed overseas, you will be charged a foreign currency. Religion fee will be charged.
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SingSaver notes: “Merchant rates can be 3 to 8% higher than the card network in use.”
•Paying with a DBS Visa credit card only incurs a dynamic currency conversion fee: S$160 x 1,008 = S$161.28
• Payment by HSBC Visa Credit Card only incurs a foreign currency transaction fee: S$160 x 1,025 = S$164
•Payment via Citibank Visa Credit Card is subject to both dynamic currency conversion fees and foreign currency transaction fees: S$160 x 1,025 x 1,008 = S$165.31
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“The tricky thing about foreign transaction fees is that they don’t show up in the payment amount when you shop online. Such charges will only show up on your credit statement,” said Mr Murthy. .
Mr Murthy said it was more expensive to charge in Singapore dollars than foreign currency when you were abroad, simply because of the unfavorable exchange rates used by merchants.
“When shopping online, always check the terms and conditions to see if payments are collected or processed overseas,” he added.
You can look for cards to stretch your dollar, he said.For CIMB, the 1.4% administrative fee is waived for CIMB Platinum MasterCard and Visa Signature Card CIMB.
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“For these two cards, there is a fee of 1.8% for Visa and 1% for MasterCard. For all other CIMB cards, 3.2% for Visa and 2.4% for MasterCard still apply. Use.” Mr Murthy emphasized that consumers should be aware of foreign transaction fees when they travel and spend abroad.
“These fees can be as high as 3% of the transaction amount, resulting in avoidable costs. The golden rule when shopping abroad is to always choose to pay in a foreign currency because of the fees. – Commonly known as a dynamic conversion fee. – Marked even higher by merchants.
“There are few Singapore credit cards that waive these administrative fees and most travelers should use such credit cards to save hundreds of dollars on their overseas spending.”
When shopping online, always check the terms and conditions to find out if payments are collected or processed overseas.
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This article was first published on July 17,
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