Aubie

Just came up with an idea...

How to eliminate foreign exchange rate fees on ATM, debit, and credit cards.

At the present, when a person travels to another country, they must pay a fee to convert their money. The most costly way to convert money is with cash or travelers checks. The most economical way is by using a major credit card. ATM withdrawals are a close second to credit cards.

Visa and Mastercard charge a 1% fee for currency conversion. Until the past year, credit card issuers did not add any additional charges to the currency conversion. Now, credit cards issuers will now be free to add an additional charge that could end up with a conversion fee of even 4%! Another way banks are slipping extra fees that earn them big profits.

I tried thinking of a way around the currency conversion. The best I think of was to open a bank account in the regions that I plan to travel and obtain a debit/credit card that from the bank. The only problem is that still find that I must transfer U.S. funds from my bank to foreign banks in order to have money for my debit/credit card. Again, I will be hit with currency conversion fees unless of course, I transfer millions of $at a time (wish I could).

Thinking some more... Why not become find a counterpart in the country I am going to travel? For example: Say the Euro and U.S. dollar are on equal exchange, 1:1. If over a year, I charge/debit/withdraw 10,000 Euro in EU countries and my counterpart charges/debits/withdraws $10,000 in the U.S. If we each pay our own bills, we will end up paying anywhere from 100 $/Euro to 400 $/Euro or more in conversion fees. But if I pay off my counterpart's U.S.-based account and my counterpart pays off my EU-based account, then we would save the conversion fees because we would pay with local currency.

What do you think? Of course, there would have to be reputable 3rd parties to actual administer the transactions as I don't want to pay my counterpart's bills and then have my money disappear. And one more thought, this is intended to be a way save money by avoiding currency conversion fees, but this is not intended to be a vehicle for currency speculation.

Anyone think this can work?

usoftie

This is usually referred to as "money laundering"
It is probably illegal according to the country in which you are doing it, but you'd have to evaluate that on a case-by-case basis.

RichG

How does Aubie's idea amount to "money laundering"? It seems to me that this procedure reduces the number of transfers and conversions. Money laundering usually increases them.

indogulf

Actually with the amounts you're talking about (and more if structured correctly)it could be construed as bartering. As in you supply a service in the US and your counterpart supplies a service in another country. This service would be currency conversion. I think most (but not all) countries do not require you to be a bank to do this. of course finding a reputable third party will be the hard part It would probably work better if you had friends (or made friends) in the country in question. I think the idea is good but the actual implementation would be the problem.

opus17

I have a Visa card issued by my credit union. It has no cash advance fee. They charge no more than 1% for conversion. They charge 13%/year for interest on cash advances -- this can be avoided totally by paying in advance.

I use this Visa card in ATM's all over the world. Outside the U.S., it is rare to charge an ATM fee. So, I get money with a 1% overhead. I doubt if it is possible to do much better.

I never change money back into dollars. If I have an excess in a currency that I don't regularly use, I use my excess money to pay part of my hotel bill.

MileKing

You could always buy foreign traveler checks from our friend Beata over at Chase, if you haven't received "the letter" yet.

QuietLion

Chase's commissions are outrageous, and they don't even disclose them, just shroud them in bad exchange rates. I use my ATM card or UA Mileage Plus MasterCard, both of which charge 1%.

doc

Or worldwide FT's could possibly somehow use the new paypal.com service to send "local" money/checks via e-mail(s) to trusted friends/colleagues, if paypal does/will provide non-US and/or foreign currency transactions! See:
http://www.flyertalk.com/forum/Forum1/HTML/001977.html

It would be risky but neat, IMHO!

Aubie

I would say that my idea is neither bartering or money laundering. It is more like transfering money much like Western Union does. And just like Western Union does, the money doesn't physically move, it gets moved in a virtual way. No money would change hands either; money deposited to a bank in one country would be credited to a bank in another, only there it would be done on a wholesale rate because the businesses that convert money could be bypassed.

Well, I am going to do it for myself. With internet banking, I can do it easily. I am just about to open a Canadian bank account which will have full internet access.

The implemenation is very easy, just getting people to use it to save perhaps only 1% is the problem. Most people aren't thrifty enough to bother with only 1% - but I am! 1% ads up when it is several thousand per year.

seawolf

Isn't what you are suggesting what financial institutions have been doing all along, except that they ARE the 3rd party and they are charging you for their services.

[This message has been edited by seawolf (edited 01-11-2000).]

Aubie

Seawolf, yes, and I don't want to give them anymore of my money than I have to.