Credit card charges (euros or US dollars) and currency xchange rate

Melissa5 · Guru

Credit card charges (euros or US dollars) and currency xchange rate

Michele Erdvig · Host

Melissa,

When you are in Ireland if you let merchants charge you in US dollars it is called dynamic currency conversion. They will add on a percentage for themselves and thus make extra money while you pay extra for them to do the conversion. If you charge in euros (or pounds sterling) they do not get an extra percentage from you. That is why many of them insist on doing it. Unless you feel like handing over an extra 3 to 6% to these kindly merchants who are doing you a BIG favor by helpfully converting it for you, DO NOT LET THEM DO IT!

All the credit card companies charge you 1% conversion that you never see on your card. Since you get their low (bulk) exchange rates it is still a good deal for you. But lately your issuing bank had decided to take their cut. They are adding on the extra 2 - 3% that is currently confusing you.

Let's say you put all your vacation money in a big pie and bake it up in the oven.

Credit Card 1% Conversion Fee = Visa, MasterCard, Amex, etc. take a tiny slice of pie (you cannot avoid giving them this slice). They provided the pan to put the pie in so you must give them a slice.

Dynamic Currency Conversion = The merchant takes a bigger slice of the pie.

Bank Credit Card Charges = Your issuing bank demands a slice of pie. Why? Because they can. You can use a card that gives them a large slice or a card that gives them a small slice. Or you can shop around and get a card where the bank takes no slice.

You are left with a partial pie. If you are smart and have prepared well in advance you may have only given away 1% of your pie and 99% still belongs to you. If you have not had enough time or did not understand the issue, you may have given away 10% (or more) of your pie. The more pie the merchants take the less pie for you.

I sure hope that explains it.

Michele

Melissa5 · Guru

Michele, so everybody is trying to hog my pie! I think I understand now. I will show your creative explanation to hubby because he will want the whole pie for himself!

Thanks for the insight.

-- Edited by Melissa5 at 01:54, 2006-07-05

Christy · Member

Citibank MC charged 3% of the converted USD amount as a separate charge on two car and B&B deposits. I guess I'll take plenty of cash also, but is the rate really about 4% higher at banks than the negotiated bulk rate?

Michele Erdvig · Host

Christy,

The bulk commercial rate you get when charging on your credit card is almost always lower than the rate you will get if you exchange cash in an Irish bank. They are in business to make money. It can differ from bank to bank and from day to day. Try for a Capital One platinum MasterCard. Right now mine does not have an international surcharge.

Michele

Christy · Member

Thanks, Michele,

I did get the Capital One Platinum and several debit/ATM cards. I still want to learn that cash is not worthless.

Christyy