Monday, November 17, 2008

Overseas credit card transaction

When purchasing items in overseas, how many of us actually pay attention to the exchange rate of the converted SGD prices of those items that were reflected on the credit card statements? As for me, I don’t usually look into the detail of that rate as long as the transactions are genuinely carried out by me. I don’t mind the exchange rate losses because I prefer to use credit cards while in overseas as I feel a sense of security without the need to carry big foreign currencies.

Last week when I was in Malaysia, I decided to make purchases using four different credit cards on the same day. I purchased four different items and was curious to find out how much do these items cost in SGD. Later I will highlight those transactions and see if we can make any conclusions among the various credit cards. But now, let me share some of the information that I have gathered from the internet regarding foreign credit card transactions that we can take note of.
  1. On the banks credit card statement, there are transaction and posting dates. Transaction date is the date when you make your purchase while posting date is the date that the conversion or exchange rate is based on. But if there is only one date on the statement, you need to check with the banks, what that date refers to.
  2. Exchange rate losses are incurred to pay fee to the Card Association (ie MasterCard, Visa, etc) and admin fee to pay to the bank. For Visa, you can check their currency exchange rate from the link that I provided. As for the bank admin fee, it is usually about 1 to 2%. Let me show an example of a fictitious purchase to understand how the conversion is to be reflected on your statement.
    a) Assuming you purchase an item worth USD$100 in overseas on 16 Nov. Assuming posting date is same as transaction date which may not necessarily be the same for all cases
    b) From Visa currency exchange rate website, the rate as published on 16 Nov was 1USD:1.52SGD
    c) Assuming bank admin fee is 1.5%, total amount to be reflected on your statement = (USD$100 * 1.52) + 1.5% = SGD$154.28

As far as I know, only Maybank charges an admin fee of 1% while most of the other banks that I checked charge a fee of 1.5% for MasterCard or Visa. For DBS AMEX, there is an admin fee of 2% imposed by the bank.

There isn’t any publication by MasterCard on their currency exchange rates. Therefore it is difficult to compare which one actually gives a better rate. But let us look at the following transactions made by me when I was in Malaysia.

ItemCredit CardCard AssociationTransaction DatePosting DateSGD Amount MYR Amount Effective Exchange Rate
1POSB EverydayMasterCard12-Nov-0813-Nov-08$22.03 $51.20 2.32410
2Citibank M1Visa12-Nov-08-$34.11 $79.00 2.31604
3SCB XtrasaverMasterCard12-Nov-0814-Nov-08$3.84 $9.00 2.34375
4UOB OneVisa12-Nov-0813-Nov-08$13.72 $31.80 2.31778
SGDMYR exchange rate

There are a few conclusions that I think I can deduce from the table. It seems that MasterCard offers a better rate than Visa as the bank admin fee is the same for all credit cards (except for Xtrasaver which I did not find out). As for the Xtrasaver card, despite posting two days later when the official exchange rate is actually lower, it was reflected with a better rate in my credit card statement. I believe the bank admin fee for a debit card is lower than a credit card.

Take note the conclusions I have above may not be conclusive enough as I did not really do an exhaustive comparison among other banks or card associations. But I hope you have some idea on what the charges are when doing overseas transactions.


Ku said...

Nice and informative write-up, well done Mike! ^_^

Mike Dirnt said...

thanks ku

long time no see. glad you are still around :)

Ku said...

FYI, Mike, I just applied for Stanchart's USD high account and received their Mastercard debit. It was published that the bank admin fee for this card is 0.8%, almost half of the usual 1.5% as mentioned in your blog. Not sure if this is a standard fee imposed for all Mastercard debit though.

Mike Dirnt said...

ku for debit card, i believe the admin fee is better than 1.5%, didnt you check for xtrasaver when you asked for USD high account?

but since you have a USD account, i believe you save on the exhange rate loss

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