Who determines the exchange rate on VISA/MC credit card transaction? VISA/MC corporate or the local merchant's bank who initially processes the transaction?
Who determines the exchange rate on an ATM cash withdrawal from your checking account transaction? Can the local merchant bank charge whatever they want? Does the transaction get debited to your checking account as a local currency debit and your bank determines the exchange rate?Thanks
I've been trying to find out more about this. But from what I can tell from reading the Visa and Mastercard annual reports to investors, when you make a purchase or ATM withdrawal in a foreign currency, the currency conversion can happen either at the Visa/MC level or at the card-issuing bank, depending on the arrangement the card-issuing bank has with the network.
My understanding is that the only time the conversion would happen at the merchant's bank would be where the merchant offers "dynamic currency conversion," and in that case you would get a receipt from the merchant with USD on it--not foreign currency. DCC almost always yields terrible exchange rates. You should never opt for it if given a choice by a merchant--especially now that US banks like Citi are tacking an extra 3% "foreign transaction fee" on these USD charges on top of the bad rates.
If anybody reading this works in the credit card world and has real working knowledge of how this works, I'd love to speak with you to better understand it.