Originally Posted by
giorginho
My other Visas and Mastercard (debit or credit cards) have always charged me for any kind of conversion (well, I was mostly purchasing stuff in USD and GBP, but I have a few examples of purchases in HUF, AED) and they've always charged me exactly what the conversion rate was on the Visa or Mastercard website plus 2,5% for transactions with Mastercard and 2% for transactions with VISA (though that's 99,9% the bank's commission and not the card issuer's).
OK, well in the UK there are many credit and debit cards available in the UK which charge 0%, so there is no need for any UK consumer to pay any fees when spending in euros or forint or dirham or whatever, unless they are bankrupt / sanctioned and therefore unable to open one of these accounts. I know that in the EU/EEA many cards do charge fees.
Some of my UK cards charge up to 3% + a fixed fee of up to £2 for any transactions not in GBP, but since I have several options to pay 0% fees I never use those cards outside the UK.
As I said, all these cards will use the Visa / Mastercard / Amex exchange rates, which are usually slightly worse than interbank, but there's no way to avoid it if paying by card.
If I opted to buy stuff on Amazon UK in EUR then the price was always higher than the price ING GBP + 2,5%, usually much higher, probably around the 5%-6% area mentioned here, same goes for pretty much all other websites/merchants. But I did test this once (using Amazon's currency conversion to pay in Euros) and I didn't get charged anything more than the price displayed on the merchant's website (I also avoided paying with my Amex in any foreign currency, since they charged way more than 2,5%!).
Yes, this is DCC.
If GBP/EUR is 1.20, the Mastercard exchange rate may be 1.205. You buy something on Amazon UK which normally costs £10. If you pay in GBP with your euro bank Mastercard that charges 2.5%, £10 becomes €12.05 at the Mastercard rate + 2.5% = €12.35. If you use Amazon UK's DCC which is around 4-5%, Amazon says the price is €12.60, you pay €12.60 with your card and you won't get any extra charges.
Anyway, the "logic" in my eyes is quite simple: If you pay the recipient of the money in a different currency than what they use themselves (btw kudos to all who managed to open accounts in various countries and run their transactions through the "corresponding" country of the customer's currency, so as to offer better prices!), then they will have the conversion done on their end and on most cases this won't happen instantly, as the payment first has to clear on the customer's end, make its way to the merchant, then get credited their accounts and get converted in their currency before it clears with their own bank.
This is not how DCC works. The merchant typically doesn't have accounts in multiple currencies. Of course Amazon will have bank accounts in many countries and I don't really know how they work internally. But if it was a small company, they would just get the £10 minus their fees, whether you choose to pay €12.60 or £10. They don't ever see that you chose to pay in euros and they don't get any euros into their bank account. The bank may share some of the profits from DCC with them though - this is one way banks get merchants to sign up to DCC.
The real scam is exchanging cash, which I only had to do once (it wasn't even any of those dubious exchange kiosks, but a very well-known German Bank!) and I learned never to do it again. Long live Revolut
!
Exchanging cash at a bank is almost always a scam, you may be paying up to 20% more. But certainly in some Eastern European countries, Turkey and some Asian countries, if you find the right bureaux, exchanging cash can be cheaper than using card especially if you need to pay 2.5% fees to your card.
I really can't judge whether this DCC thing as far as Aegean is concerned is a scam or not. If indeed 5-6% is the case, that seems almost fair enough (2,5% conversion fee from card issuer / bank and another 2,5%-3% to prevent losses from currency fluctuations). Also, where one sees an airline trying to generate income, a customer might see an opportunity to reduce their hassling with their banks about transactions in foreign currencies and their fees. I would like to say that I don't like the fact, that I have to get my calculator and open xe. com on my browser every time I want to check out some prices in Budapest or ex-BUD
. I still book in HUF, but it's a nuisance already...
Aegean doesn't have any currency risk! They only get paid in euros and the bank takes all the risk (but not really, because the banks operate DCC in both directions with merchants all over the world). There is a risk to you the consumer, but unless you trade currency options there is not really any way to remove this risk.
LHR-ATH 5th April 1215: light fare is €299.09.
XE.com rate is £248.13.
Revolut rate is £249.51 (but it's the weekend, will be less on weekdays).
Visa exchange rate is £250.34.
Mastercard exchange rate is £250.38.
However you won't know the rate for your transaction in advance, as the rate that applies will be determined 1-2 days after you actually pay.
If I change the currency to GBP on A3's website, the price becomes £262.16!!
Even if your card charges an extra 3%, the £250.38 Mastercard rate becomes £257.89 which is still cheaper. With a 0% fee card, why would I pay £12 more?
The only reason to is pay £262.16 today is because you think it might become £266 by the time the transaction is processed. But if you are so sure the rate will move in this way, you should trade forex. It might just as likely go to £253 tomorrow. On average it will move in your favour 50% of the time and against you 50% of the time, but if you pay the extra £12 you will be losing 99.9% of the time, unless your country is about to be sanctioned by half of the rest of the world.
Thanks to
GUWonder for highlighting this.