garykung

I am not try to run a conspiracy theory.

But on my recent trip, which I used my US AMEX Platinum Card, I checked the exchange rate.

The rate was actually lower than I was getting cash from ATM.

To me, it seems like that AMEX loaded the cost back to exchange rate - so transaction fee disappears but you have nothing else to save up.

Do anyone feel the same way?

mia

All credit card issuers concealed their markup in the exchange rate until a few years ago. As part of a class action settlement the issuers reimbursed large amounts of hidden fees, paid legal fees, and agreed to disclose fees for the future. American Express would be incredibly naive to think that it could revert to the previous model now.

Remember, the exchange rate is determined on that date the transaction posts, not the date the purchase is made, and the dollar has been weakening. You need to look at ATM transactions with the same posting date as the American Express posting dates, and you would need a large number of matched pairs to draw a valid conclusion.

As it happens I have a pair of transactions made in London on the same date. American Express conversion rate is $1.6389, Chase VISA rate is $1.6366. Is this the magnitude of difference that you are seeing?

wesheltonj

(1) They never said that they were not going to make money on the spead, or (2) That you would get the best exchange rate.

Just they said would not charge a fee for the exchange, just like in the good old days.

thegreathabibi

if your so worried about your exchange rate, in foreign countries use cash, no matter how much i use my card in the united states, overseas im cash only. always get a better deal using cash on the purchase itself and exchange rate.

change houses will give you the best rates and majority have no fees, the ones in airports and hotels are ripoffs, just find one in the streets you will come out ontop, points dont make up for the difference between a card and cash overseas

and your free to negotiate when your paying with cash in most countries, this can save you even more

Steve M

If they have no fees, how do they stay in business? Or, do they just operate as a charity?

I suspect that the Amex Platinum/Centurion "no forex fee" is around the best deal that can be had these days, perhaps except for merchants that will give you a discount by paying in cash.

mtkeller

The rate seems fine to me, as well, at least in terms of sterling. I've got a charge posted with an exchange rate of $1.63875, and looking back at the market exchange rate for that date, I see that it's coming up at $1.63. If OP can get cash from a foreign ATM without paying foreign transaction fees, then that's probably a good move (especially with the tanking dollar, which was around $1.50/£ last autumn and has now fallen to more like $1.70/£). However, my ATM cards stack on out of network ATM fees and foreign currency fees like crazy.

Since I'm temporarily living in Europe, I do tend to use my UK (non-plat) AmEx in the UK, but sometimes I want to use my US Plat and am fine with the rate now that the forex fee is gone. I also have a CapitalOne card for use primarily in the eurozone with the many merchants who won't take AmEx. For cash, I have a prepaid euro debit card (MasterCard) that gives competitive exchange rates when loading and allows me to not be carrying piles of cash in my wallet all the time.

Fiumicino

Rate look reasonable also to me, I have been using my card in the Asia Pacific heavily and nothing to complain about.

mia

At a currency exchange it's easy to see the markup by looking at the spread between the buy and sell rates for same currency pair. With a payment card it's more difficult because you are always buying the other currency, and you cannot see the spread. Comparing the credit card rate to the fictional "mid-market" rates isn't precisely correct, you should be looking at what it would have cost to buy the other currency on the posting date, but for wholesale transactions the difference is very small.

Steve M

I understand that. It was a rhetorical question aimed at the person that claimed that exchanging cash was a better deal than the no-fee Amex because the exchange houses "had no fees."

Steve M

Actually, isn't the Amex exchange rate based on that in effect "the day of, or the day following" the posting date?

In any event, I don't think that ATM transactions are necessarily based on the forex rate in effect as of the posting date, but sometimes a prior day's amount. What I mean is that I think the forex rate used for ATM's is fixed at the moment the transaction is made. If it's not during business hours or on a business day, this will result in an exchange rate from a day that's before the posting date from being used. The reason I think this is true is that recently my bank has added real-time display of pending ATM transactions onto their website. I can make an overseas cash withdrawal, log onto my account on bank's website, and see an exact amount as a pending transaction. When the transaction posts as a finalized transaction, it's always for that same exact amount. The only way this could happen is if the exchange rate is known and fixed at the time of the physical transaction, which means it's backwards-looking in some cases.

mtkeller

I think you're right in terms of ATM transactions, as they need to know about transaction limits, etc. in a way that credit card companies may be more willing to be flexible about. I once tried to withdraw £200 and was denied. Turns out that the transaction was being seen by my bank as $315 and my daily limit was $310. (Don't ask how the limit wasn't $300, but this is what I got from my bank when I called.) Not knowing exchange rates off the top of your head when making an ATM withdrawal can be problematic, especially if you get hit with a per-transaction fee and thus want to minimize the number of such transactions you make.

mia

I understand that you understand. Forum discussions are public, and my reply was extending your idea. Sorry if I gave the impression I was disagreeing with anything you wrote.

garykung

I never said they should not make money...It is simply that if you said you remove a charge then use other means to re-capture the fee...it does not sound right.

My suspicion is that for 2 AMEX Card - one have FOREX fee, and one does not. They use different exchange rate (even it is the same day transaction) for the card has the fee and one has not.

This is what I have experienced in Seoul...

I am not defending of mia, which is the Mod here. But is comparing cash than AMEX kind of OT? My purpose is to see if there is anyone else at FT in fact experienced something similar.

Steve M

US-based banks typically pad the stated daily limit by a small amount, such as $10. So, if they tell you $300, it's actually $310. A $500 limit is actually $510, etc. This is to allow you to withdraw up to your limit in cash and still have room for any fees the ATM might charge. When a transaction comes in over the ATM network for authorization, there's no distinction between the actual withdrawal amount and the ATM operator's fee. So if you withdraw $300 from a machine with a $2.50 service charge, your bank sees a withdrawal request for $302.50 cash, and has to return a yes/no response. When the ATM fees first started appearing on the market some 20 years ago, it was easier for most banks to just bump up the hard limit on file for each account, rather than build a fudge factor into the decision-making algorithm.

mtkeller

I would be very surprised if this were the case, and if it were, we'd be noticing exchange rates that are off-kilter on the transactions without forex fees. The T&C spell out foreign transactions and how they're converted and then specify that plat and cent cards don't incur the forex fee, so I'd say it's the same rate.