Foreign Currency Conversion Fee

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roby

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Just noticed that CBA calls the foreign currency conversion fee the international transcation fee and charges this even if the transaction is made in AUD but overseas. Is this right? I thought other banks wouldn't charge this fee as long as the transaction is made in AUD as there was no currency conversion to start with. Is this legal? Many overseas merchants now have the ability to convert the currency at their end so that cardholders can lock in current exchange rate. CBA then still charging this has no base to stand on. Others thoughts?
 
As far as I know, this is completely legal(not in your favour, but legal) as they claim it costs some amount to process an "international" transaction regardless of what currency it's in.

Also, with the option of the merchant converting to the native currency of the card on their end(think it's called dynamic currency conversion or similar) I'm pretty sure this is the worst option of the lot and targeted at unseasoned travelers as the exchange rate they give you is very bad, as they build in their own markup for the convenience, along with a currency exchange fee. Never take this option.

Pretty much, use either the 28 degrees card or the NAB gold card to avoid stuff like this and NEVER choose the DCC option.
 
As far as I know, this is completely legal(not in your favour, but legal) as they claim it costs some amount to process an "international" transaction regardless of what currency it's in.

Also, with the option of the merchant converting to the native currency of the card on their end(think it's called dynamic currency conversion or similar) I'm pretty sure this is the worst option of the lot and targeted at unseasoned travelers as the exchange rate they give you is very bad, as they build in their own markup for the convenience, along with a currency exchange fee. Never take this option.

Pretty much, use either the 28 degrees card or the NAB gold card to avoid stuff like this and NEVER choose the DCC option.

I raise this issue because other banks incorperate the fee into the amount finally shown on the statement whereas CBA lists it separately from the transaction. So with other banks, this fee will not occur. It's just unfair as you say the overseas bank already added their markup so why I should be added markup twice?

Most other banks word this fee Foreign Currency Conversion fee but CBA words it International Transaction Fee. So I do think CBA cunningly charges this fee where it shouldn't as there is no conversion.
 
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Whether the other banks include it in the final amount or list it as a separate charge, the end result ends up being the same. Either you get a smaller final amount and a separate transaction fee OR you get a larger final amount with the transaction fee included.

If they don't list it separately as currency exchange fee, look in the small print and invariably, it'll say the final amount includes a foreign currency exchange or processing fee. The only cards in Oz that I know of that don't do this are the aforementioned cards.

CBA have just worded the fee so that it explicitly includes both foreign currency transactions and international transactions conducted in AU. I think you'll find that other banks and providers also do the same with both types, but perhaps dont disclose it separately as a extra cost.

Personally I like it displayed as an extra transaction so I can see exactly what my money is buying
 
Whether the other banks include it in the final amount or list it as a separate charge, the end result ends up being the same. Either you get a smaller final amount and a separate transaction fee OR you get a larger final amount with the transaction fee included.

If they don't list it separately as currency exchange fee, look in the small print and invariably, it'll say the final amount includes a foreign currency exchange or processing fee. The only cards in Oz that I know of that don't do this are the aforementioned cards.

CBA have just worded the fee so that it explicitly includes both foreign currency transactions and international transactions conducted in AU. I think you'll find that other banks and providers also do the same with both types, but perhaps dont disclose it separately as a extra cost.

Personally I like it displayed as an extra transaction so I can see exactly what my money is buying

No, you are missing the point. I am saying exactly other banks don't charge additional fee when the transaction is made in AUD regardless of transaction location. They call it foreign currency conversion fee so they don't charge it when there is no conversion. I am saying exactly CBA is ripping us off.
 
I am saying exactly other banks don't charge additional fee when the transaction is made in AUD regardless of transaction location.

This is not true. Both ANZ and NAB have charges to cover this scenario.
 
No, you are missing the point. I am saying exactly other banks don't charge additional fee when the transaction is made in AUD regardless of transaction location. They call it foreign currency conversion fee so they don't charge it when there is no conversion. I am saying exactly CBA is ripping us off.

That is my point. Just because the other banks don't separate it into a separate charge doesn't mean they are not charging it, regardless of what they call it. As far as I know(and I'm happy to be corrected), from my personal experience with all the big banks, they all charge it even if the transaction was conducted in AUD if it originated from overseas.

I'm not saying that CBA isn't ripping us off, I'm just saying that all the banks are ripping us off, not just CBA, but at least CBA discloses it upfront. I haven't bought anything from overseas on my ANZ credit card recently, but they definitely used to charge it on all international purchases, regardless of whether it was in AUD, USD, GBP...

Update:
see a similar post regd an ANZ credit card, where they've detailed it along with an extract from the T&Cs:
http://www.australianfrequentflyer....n/anz-qff-overseas-transaction-fee-26702.html

Just checked NAB and Westpac credit cards info, and they all seem to charge for where "the merchant or financial institution accepting the card is located outside of Australia" regardless of currency. I believe that this is a cost imposed by VISA, Mastercard, AMEX, and its just passed on to banks customers. I stopped looking at these so closely ages ago as I no longer use any of my bank credit cards for overseas transactions so they all go into the "don't care" bucket now since I've found much better alternatives.

I'm not really sure how the 28degrees seems to absorb this cost themselves rather than passing it on to the customers, but every time I've used the card, the exchange rate is very close to XE rates, and sometimes is better.


 
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That is my point. Just because the other banks don't separate it into a separate charge doesn't mean they are not charging it, regardless of what they call it. As far as I know(and I'm happy to be corrected), from my personal experience with all the big banks, they all charge it even if the transaction was conducted in AUD if it originated from overseas.

Thanks. I haven't really looked closely at other cards because they seem to call it foreign conversion fee so I had assumed they don't charge it. I believe this is a revenue generating fee for most banks rather than the likes of 28 Degrees absorbing it.

Also when a bank lists this fee separately from the transaction then it won't get you any rewards points will it? With other banks combining it together you at least earn some points from the fee.
 
Banks used to only charge a fee for transactions carried out in a foreign currency. This fee was (and is) charged regardless of where the transaction occurs and includes a component that is a fee charged to the bank by visa or mcard. So for example CBA charge a 2.95% fee of which 1% is the issuer fee and the rest profit for the bank.

What then happened with the introduction of DCC was that customers were using their cards overseas but being charged in AUD which meant that the merchant and the DCC supplier were getting the profit percentage on the transaction instead of the bank. So the banks reacted by introducing a fee comparable to the foreign currency fee to be levied on all AUD transactions where the merchant was overseas. AFAIK the CC issuers do not charge a special fee for such transactions so the fee is purely a bank charge. CBA's fee in 2% with no CC issuer component so the 2% is just profit for the bank.
 
Thanks. I haven't really looked closely at other cards because they seem to call it foreign conversion fee so I had assumed they don't charge it. I believe this is a revenue generating fee for most banks rather than the likes of 28 Degrees absorbing it.

Also when a bank lists this fee separately from the transaction then it won't get you any rewards points will it? With other banks combining it together you at least earn some points from the fee.

Never thought about that aspect of it(points earning), but I would have thought that even if the fee was listed separately, it would still accumulate points as its still being charged to the card. As I value the savings in foreign currency exchange much higher than the value of the points, I don't even bother checking that aspect but would be interesting to know how it is treated.

Banks used to only charge a fee for transactions carried out in a foreign currency. This fee was (and is) charged regardless of where the transaction occurs and includes a component that is a fee charged to the bank by visa or mcard. So for example CBA charge a 2.95% fee of which 1% is the issuer fee and the rest profit for the bank.



What then happened with the introduction of DCC was that customers were using their cards overseas but being charged in AUD which meant that the merchant and the DCC supplier were getting the profit percentage on the transaction instead of the bank. So the banks reacted by introducing a fee comparable to the foreign currency fee to be levied on all AUD transactions where the merchant was overseas. AFAIK the CC issuers do not charge a special fee for such transactions so the fee is purely a bank charge. CBA's fee in 2% with no CC issuer component so the 2% is just profit for the bank.

That sounds about right and pretty much close to what I've heard about DCC and how it made banks/issuers react. However, from my limited research and reading into this matter, I'm pretty sure that the CC issuers Visa and Mastercard both charge a fee for cross-border transactions, regardless of the currency. Off the top of my head, Visa charges 1% while Mastercard charges 0.8%, but take those figures with a grain of salt. Of course, banks are free to charge an extra charge on top of this as well and pass the whole lot off to the customer, which I'm pretty sure they do.
 
Due to several paypal purchases over the last statement period, I had these appear at the end of the statement. One quick email to my personal banker at CBA, and these were all reversed. I am not sure whether she did it as a one off, or whether it will happen at the end of each month.
 
My recent experience: Amex & ANZ give points for forex based fees.

Westpac, HSBC (Woolies M/C) don't - they list the fee separately.
 
I should also point out that unlike CBA, Westpac doesn't charge a fee if the merchant accepting the card is outside Australia, and charges the card in $AUD. Of course, it's still cheaper not to use DCC at all, but for PayPal purchases where you don't always know which country the card will be charged from (even if in $AUD), it makes it just *that* bit cheaper over the CBA card. :)
 
I should also point out that unlike CBA, Westpac doesn't charge a fee if the merchant accepting the card is outside Australia, and charges the card in $AUD. Of course, it's still cheaper not to use DCC at all, but for PayPal purchases where you don't always know which country the card will be charged from (even if in $AUD), it makes it just *that* bit cheaper over the CBA card. :)

Might want to double-check that Westpac doesn't charge that fee....pretty sure it does:

Using Your Credit Card Overseas - Westpac

Extract:
  • 1. Visa Worldwide PTe LTD charges us 1.0% of the transaction amount where a transaction is made using your Visa Card and the merchant or financial institution accepting the card is located outside of Australia. We pass this amount on to our customers.
  • 2. American Express [SUP]C[/SUP] International Incorporated charges us this fee on the transaction amount for converting foreign currency transactions made using an American Express [SUP]®[/SUP] into Australian dollars. We pass this amount on to our customers.
  • 3.MasterCard [SUP]®[/SUP] International Incorporated charges us 0.8% of the transaction amount when a transaction is made using your MasterCard [SUP]®[/SUP] and the merchant or financial institution accepting the card is located outside of Australia. We pass this amount on to our customers.
  • 4.MasterCard [SUP]®[/SUP] International Incorporated charges us 0.2% of the transaction amount for converting foreign currency transactions made using a MasterCard [SUP]®[/SUP] into Australian dollars. We pass this amount on to our customers.
Might not be as much as the foreign currency exchange fee, but the cost of the foreign transaction fee is still charged to you.

L
ike I said before, just because they may not be displaying it as an extra fee on the statement doesn't mean they haven't already incorporated it into the charge.
 
Might not be as much as the foreign currency exchange fee, but the cost of the foreign transaction fee is still charged to you.

L
ike I said before, just because they may not be displaying it as an extra fee on the statement doesn't mean they haven't already incorporated it into the charge.
From reviewing my statement, as recently as one week ago, I've had $AUD charges from abroad (indicated by a different country code on the charge) on by Westpac account which did not attract any additional fees (the amount that appeared on the statement was the exact amount that was charged by the merchant - and no fees have been added on other lines of the bill in relation to the charge). They won't have been able to incorporate it into any such charge, as the charge was already in $AUD and appeared at it's original value.

What banks *say* and what banks *do* are two completely different things :p
 
Woah, thats unexpected. There wasn't an extra charge, hidden away at the end of the bill somewhere either? Not listed as a separate line item, but as a sort of summary note? I've seen that done before on my ANZ credit card back when I did use it for overseas transactions. If not, I think this is the first time I've heard of that a bank hasn't done something they said they would that has worked out to the advantage of the customer! Well done on "getting one over" on em :)

Still, the DCC needed to get it into AUD currency at the other end would have been at a coughpy exchange rate so I would still avoid using either credit card from CBA or Westpac for stuff like this.
 
I'm think such transactions are those the slip through the cracks of an automatic process.

I would not advise the bank of this.;)

I just checked my fee schedule, and it only talks about charges where there has been an actual conversion.
 
Woah, thats unexpected. There wasn't an extra charge, hidden away at the end of the bill somewhere either? Not listed as a separate line item, but as a sort of summary note? I've seen that done before on my ANZ credit card back when I did use it for overseas transactions. If not, I think this is the first time I've heard of that a bank hasn't done something they said they would that has worked out to the advantage of the customer! Well done on "getting one over" on em :)

Still, the DCC needed to get it into AUD currency at the other end would have been at a coughpy exchange rate so I would still avoid using either credit card from CBA or Westpac for stuff like this.
Nope - no extra line item, no summary charge! :D

And I usually avoid using DCC (... I mostly don't even get the option because most charges are to my Amex), however in this case, it was cheaper to use DCC (with no WBC fee) than to pay the WBC exchange rate + foreign currency conversion fee, as this merchant had no DCC commission built into the rate (a rare find)... though usually it would end up cheaper the other way around :)
 
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