Mountain Trader

Kremmen-

I disagree with the idea that using a credit card that charges 3% to convert currency is a wash if the card gives airline FF miles.

The 2% extra charge (over the washed 1%) is cash out-of-pocket today. Even if you got 2 cents a mile for your FF points down the road, you've actually bought those miles for 2 cents each, plus the float. Not a good deal to me.

While it's really another topic, I also doubt that miles are still worth 2 cents given the program changes of late, at least to me. UA's award to upgrade to business for Europe went from 40,000 to 60,000. That's an award I target so my former valuation of miles at 1.8 cents went down to 1.2 cents.

My ATM card doesn't add overseas fees and on average I get cash for about 1/2-1% over the interbank rate for $1 million transactions. Not bad.

Finally, I think .5% for float on the cc payment is high in today's environment. If you're investing money, that's pretty hard to find, though I imagine if you're saving interest on credit cards, it's obtainable.

Back to the inital question-Eugene gave excellant advice. Just don't forget the 4 digit pin.

Kremmen

Are you trying to tell us that you can take out money overseas at the interbank rate with no margin to the network running the transaction? That would make the international networks run at a loss, as some mind of public service. You're welcome to your fantasy. It's a very nice fantasy, mind you.

However, given the plethora of evidence to the contrary, I suggest that you are the one that is incorrect. Have a look at http://www.bankrate.com/brm/news/cc/20010625a.asp as a starting point.

To the best of my knowledge, there has never been a banking product of any sort that operates for the consumer at the interbank rate. Whether you use travellers' cheques, plastic, TTs, or whatever, foreign exchange costs you something.

Eugene

I'm not "trying to tell you", I'm telling you.

And no, ATM networks don't run at a loss, they make their money on fees, but those fees are flat fees for some, and percentage based for others.

You seem to not have read carefully the article you're referring to in your post. It's very simple. Really.

VISA and MasterCard set up their fees based on the amount of transaction, and charge 1% each as a fee for transactions in foreign currencies. Some banks add extra fees of up to 2% extra on top of what VISA or MasterCard charge, and pocket that money. American Express charges 2% as a fee for transactions in foreign currencies.

If you use your debit card that carries a VISA or MasterCard logo, you'll be subject to the same fee.

But, if you are using a regular ATM card (not a debit VISA/MC card) using CIRRUS or MOST networks, the fee comes as a flat fee (in case of my bank, $1 per each withdrawal, with withdrawals up to $500 at a time). And no, it's not a fantasy but rather a hard fact that the exchange rate used is an interbank one (or extremely close to it, less than a fraction of a % difference IME). I've compared the rates used on my ATM withdrawals in Europe, Australia, and Africa, and on my VISA/MC transactions at the same locations on the same day. The difference is always about 1% in favor of the ATM transactions. That means that if you withdraw more than a $100 equivalent in local currency at a time, you come out ahead.

These things may work differently for Australian-issued cards, but that's how it works for me.

USAFAN

Eugene:
You, I and others did not read KC747's posting well.
Ho does not have a regular ATM card! So the best way for him is to use his credit cards to charge and/or get cash from an ATM.
Regarding ATM cards, I agree with you. They are mostly cheaper. Next, the credit card companies have a lot of "fine prints" for tricky fees.
American Express charged me a $29 overlimit fee for $230 over the limit; I did not know my limit and did not know about the fee. O.K. it's was my fault. I wrote them an e-mail and got the fee back within 2 days.

Eugene

Hmm... I thought he/she said to the contrary:

KC747

USAFAN,

AS Eugine pointed out, I have normal ATM card.

Thank you.

Kremmen

If you are using Cirrus' network, you're using Mastercard's network. If there are some cards being treated differently to others while using the same network, well, this pretty much takes the cake as far as bank stupidity.

On one of my accounts, I can choose to have a card with a Visa logo on it or not. Would the Visa/PLUS network say "ooh, he's not got a Visa logo on his card, so I won't charge him as much"? While ludicrous, I guess it's not totally impossible, however I'm yet to see anyone other than you report it being this way.

Given that the vast majority of ATM cards used overseas do seem to have Visa or MC logos on them, it strikes me as mostly academic.

Kremmen

Oh, another disadvantage with debit cards is that, with a set fee per transaction, you want to make the transactions as large as possible to minimise fees, but there may be local limits.

I don't know what the limit is in France, but when I withdrew money in Italy 2 years ago, the maximum the ATM would allow worked out to not than much more than US$100. I had to make 2 transactions to get the cash I needed, and was close to needing a third. Your $2/transaction card is going to end up being at least 2% in such circumstances.

Eugene

It's not the network that is important, but how your bank treats the transaction. And it's not "bank stupidity", it's an issue of competition for your money. For example, some banks (again, in the US at least) offer customers rebates of ATM fees (be it domestically or internationally).

Remember, banks are under no obligation to pass extra charges and fees levied by the third parties to the customers, they can absorb them if they choose to do so.

Actually, I have the same choice on my checking account. I can either have a regular ATM card, or a MasterCard debit card. These cards would be subject to different T&C's though, and have different encoding on their magnetic strip.

What appears to be academic to you, is a very practical issue for others, and could save them from unnecessarily wasting money (even if a few bucks).

Here's another testimony (see the thread Best way of getting foreign currency? Opinion):


And for those who want to find out how much the rates used on their transactions or withdrawals differ from the interbank rate on any particular date, here's a great tool:

Historical Currency Exchange Rates.

Check your past transactions and find out whether your bank gives you as good a deal as you thought it did.

Kremmen

It's long been a favourite of mine.

One of the problems with many people's reports of such things is that "my bank didn't charge any fee" means "my bank didn't make any fee obvious to me". The vast majority of people will never notice the usual 1% difference (or even a 2% or 3% difference) between their card's rate and the interbank rate. ... Indeed, it's very hard to detect a 1% difference unless you average over quite a number of transactions, since it can be absorbed by currency fluctuations from one day to the next anyhow.

jerseyfinn

As folks here do point out, one should consider using ATMs instead of travelers checks or currency exchange bureaus.

IMHO a credit card is an acceptable tool for obtaining cash overseas.

I personally do not fret about whether or not I get the "best" exchange deal as much as I try to get a "fair" exchange deal. This is of course a subjective opinion.

What I have learned from my own travel is that I use my credit cards to pay for purchases as much as possible. The exchange problem is resolved when I get home and pay the credit card bill.

When I arrive at my destination I use my credit card to make a cash withdrawal, usually for at least $300 to $400 with object of minimizing the effect of the service charge. This is my pocket change for in-country spending.

Am I getting the best exchange deal? I doubt it. But if as a result I'm out $10 or $15 after a nice trip abroad, I don't sweat it --I had a good time.

It's just my own approach to life and not meant a critique of other FT opinions here.
There are indeed many ways to look at an issue.

respectfully,

Barry

chalf

When making these decisions, it also helps to ensure that one is comparing like products. While the ATM/debit card might be the lowest cost means of obtaining CASH, that does not mean that it is the best approach to paying for a weeklong stay in a 4-star hotel. As has been noted by others, the same considerations regarding payment vehicles as at home should apply: safety and security, time value of money, transaction costs, and rewards possibilities. I would far rather pay an extra 1-2% for using my credit card (some of which is offset by any mileage earned) than be robbed in a foreign country after making a large withdrawal from an ATM!

When using ATM/debit cards, I have been told that it is actually preferable to carry one with a Visa/MC logo when outside the US. If the PLUS/Cirrus network does not work (quite possible), cash withdrawals with a Visa/MC logo card will be treated as [no fee] "cash advances" on a debit card, whereas those without such a logo are left cashless. I can not confirm this network difference, but it sounds plausible.

When pinching pennies in this field, I have also noticed that calculation dates appear to vary between banks. That is, two transactions on the same date on different cards (debit, credit, whatever) may be converted at different rates, depending on how quickly the issuing bank receives the transaction from the merchant and posts it to one's account. If you really want to get into the intricacies of this business, send your resume to the Forex trading desk of a major bank.

I second Jerseyfinn's approach: make educated choices, have fun, and don't worry excessively about small differences.

My $.02 on the original question:
1) Poor idea
2) Discussed in this thread; probably higher cost than other options
3) Likely more costly than 4 or 5; worse exchange rate/commission and may be issuing costs in the US
4) Best choice for large transactions
5) If your bank doesn't charge excessive fees, probably the best option for cash transactions

[This message has been edited by chalf (edited 11-28-2002).]

meFIRST

dup post

[This message has been edited by meFIRST (edited 12-01-2002).]

meFIRST

Originally posted by meFIRST:
I bank with Citibank and one of the good things about it is that they have ATM's and Branch offices everywhere. Esp in Europe and Asia.

I know that if you withdraw money from an overseas citibank there is no ATM fees.

Overseas ATM trasactions are processed through the VISA/MC networks since there is no Star/Plus/NYCE network around.

Just make sure your debit/atm card has a Visa/MC logo on it and you should be fine. Used it all the time.

Also note that - >Avaliable funds will come from your CHECKING account. There is no option for you to move money from Savings to checking at a foreign ATM if you don't have enough in checking.

What I had to do once when I was in europe,
was to go to a internet cafe, login to my bank in the US internet banking site and move money. Then walked to the ATM to withdraw, funds were availiable immidiately.

craz

Please correct me if Im wrong, I always thought that when you use your CC to withdraw from an ATM or whatever that its treated as a Cash advance and therefore the % starts being charged from the day you get it, I NEVER did it nor do I plan to, I thought the 3% or 2%/1% that the CCs charge are for when you buy something other than MONEY.( I do believe besides the % charges that there is also a fee that is charged as well)