Choosing a currency for a cr card purchase when out of AU?

[sweens]

Often when I am making a purchase at an international airport they offer a choice of currency to be charged in and I have always wondered if my normal choice is the best value for me.

I would normally choose the local currency of the country I am in, as I use a 28 Degrees M/C who do not charge the normal 2.5% transation fee for international transactions.

My question is: am I right to believe that this is the best value for me as if I chose to be charged in A$ when purchasing say in Singapore I would probabely be liable for a poor forex conversion rate to A$ as compared to my cr card provider.

Can anyone enlighten me on this?

 

[Homer]

I have been under the impression that this is a bit of a trick by the merchant’s bank to charge you a forex conversion fee at their unattractive point-of-sale rates, and that the best course of action is to choose the local currency rather than AUD when prompted. But I don’t have a source for this - just something I think I remember reading - so I’ll be interested in the answer.

 

[Craigie]

I keep pretty up to date with foreign currency rates and exchanges, and every time i've ever been asked which currency i'd prefer it in, the AUD amount is cough, if you've got a 28 degrees card then just stick to the local currency IMO

 

[oz_mark]

Generally speaking, Dynamic Currency Conversion yields worse conversion rates than if charging through the local currency and letting Visa/MC do the conversion.

 

[sweens]

Generally speaking, Dynamic Currency Conversion yields worse conversion rates than if charging through the local currency and letting Visa/MC do the conversion.

Thanks for the feedback...I suppose the follow up question is if I used my AU AM EX card and chose A$ at the point of purchase in Sing would the 2.5% transaction fee be applicable as the purchase would be in AUD?

 

[Awesom Andy]

Thanks for the feedback...I suppose the follow up question is if I used my AU AM EX card and chose A$ at the point of purchase in Sing would the 2.5% transaction fee be applicable as the purchase would be in AUD?

You won't pay the 2.5% fee, but it usually works out that it's still cheaper to pay this fee than to have the payment settled in AUD at the point of sale.

 

[ric_melb]

There have been threads on a number of sites regarding Dynamic Currency Conversion. The general consensus is that you are better being charged in the foreign currency. If charged in AUD the conversion is at a far worse rate. My understanding is that DCC is only available for Visa/Mastercard. Not available on Amex.

 

[notzac]

You'll always get a better conversion rate if you pay in local currency; IIRC the dynamic rates are generally set to kick back a commission to the merchant, and that commission has to come from somewhere..

 

[m_ratt]

You won't pay the 2.5% fee, but it usually works out that it's still cheaper to pay this fee than to have the payment settled in AUD at the point of sale.

When I read through the PDS for my cards before I travelled, there certainly was a 2.5% fee even if I paid in AU$ while overseas..

 

[Stephen65]

In my experience you are always better off being charged in the local currency and letting the credit company handle the forex conversion even with the usual 0-3% fee added on. The conversion rate you get when electing to pay in AUD via dynamic currency conversion is usually terrible.

 

[ozmille]

I have always paid in local currency. My european credit card has a clause in it that states that they will charge the lowest exchange rate of the day the transaction was processed.

 

[Zulaiha]

I bought 2 set of tickets for me and hubby, and for our girls from the same airlines, using the same credit card (28 degree), I choose 1 using AUD, another using local currency to pay, and yes, it ended up AUD50 more in one that using AUD compared to the one that I paid using the local currency

I did that twice, and it roughly ended up the same thing, how stupid was I? But yeah, to answer your question I definitely will never let the merchant do me exchange ever again

 

[serfty]

With the introduction of DCC, both M/C and Visa very quickly changed the PDS's/T&C for most products to allow them to charge an international usage fee, even if charged in AUD.

In general, the only ones who do better out of this is the Business you are buying from and their Banking Service providers.

 

[sweens]

I bought 2 set of tickets for me and hubby, and for our girls from the same airlines, using the same credit card (28 degree), I choose 1 using AUD, another using local currency to pay, and yes, it ended up AUD50 more in one that using AUD compared to the one that I paid using the local currency

I did that twice, and it roughly ended up the same thing, how stupid was I? But yeah, to answer your question I definitely will never let the merchant do me exchange ever again

Thanks to everone for the information and now a real example...the bottom line message here is to steer clear of the DCC option, always select the local currency and get a 28 Degrees M/C if you need to use your CC outside of AU!

 

[Zulaiha]

the part that I've forgot to mention was that transaction was for around AUD1,700 ish. One transaction being 1,69 something, and the other is 1,74 something, I just remembered being 50$ difference for a 17 hundred transaction which is a lot me think

 

[DeKa]

When I read through the PDS for my cards before I travelled, there certainly was a 2.5% fee even if I paid in AU$ while overseas..

Same for me. This is why it is most often called an "Overseas Transaction Charge" now, not a "Foreign Currency Conversion Fee".
As long as the merchant is outside of Australia, you will get hit with this 2-3% charge (except w/ 28 Degrees) whether charged in local currency or AUD.

 

[ChrisFlyer]

The whole reason Dynamic Currency Conversion (DCC) exists is to actually get the merchant more money... I still have the mailers that were sent from the credit card networks to convince me to enable DCC on my terminals, and essentially, the exchange rate is inflated by 1.5% (in Australia anyway), and the merchant is actually paid the 1.5% as a profit - not a bad way for them to offset the cost of accepting international cards! This is the reason that when a DCC transaction is processed with a signature, it usually has the line "I confirm that I was offered to pay in the original currency" - so that the merchant doesn't sneakily choose the home currency for every foreign customer. It gets even better when you take into account that some banks charge up to 3.5% in FOREX fees - so you're essentially paying 5% more than you have to!

Only Visa & MasterCard can process as DCC. Until very recently, AMEX only allowed merchants to accept payments in their home currency. If they wanted to accept any other currency, they had to setup a merchant account in a country that used their desired currency (thus why some multi-currency sites only accept Amex for $USD). Some merchants are now able to do multi-currency from the one merchant account, although there is a lot of paperwork involved to make that happen (and it's only usually for online payments - not through an EFTPOS terminal)... Diners doesn't support DCC either.

 

[ians1949]

I bought 2 set of tickets for me and hubby, and for our girls from the same airlines, using the same credit card (28 degree), I choose 1 using AUD, another using local currency to pay, and yes, it ended up AUD50 more in one that using AUD compared to the one that I paid using the local currency

I did that twice, and it roughly ended up the same thing, how stupid was I? But yeah, to answer your question I definitely will never let the merchant do me exchange ever again

I got caught twice recently booking Ryanair flights with 28 degrees card - fare was quoted in AUD and twice I missed the checkbox to change to local currency (GBP or Euro) - got a very poor "exchange rate" but still amazing fares - third time lucky though... Always read the fine print!

 

[travelislife]

Yea I got 'done' with bloody ryanair too. Using the 28degreescard all prices quoted in euros and then when the paid confirmation screen popped up in AUD! Totally missed the automatic dynamic conversion box that I was meant to untick. Wasn't till I did some googling and found out about the sneaky buggers. Was hardly given a choice.

 

[Cynicor]

Watch out for amazon doing the sneaky DCC thing too. Normally appears in the top right, but you can select USD for the charges quite easily.