That may have led to British online fashion retailer Asos reportedly crashing on the same day, with consumers trying to take advantage of the diving pound to shop. Or take the Swiss National Bank shocking foreign exchange and financial markets on Jan 15 last year, when it decided to abandon the minimum rate of 1. With events like these, and credit card issuers, retailers and tourism-related businesses dangling carrots and gimmicks to win customers, it can be complicated for the lone customer with a credit card to suss out what's best.
Credit card transactions processed overseas are subject to administrative charges from card associations. The Sunday Times Invest looks at some common matters about credit cards, currency conversion and fees, especially regarding foreign-related transactions. Personal finance comparison portal SingSaver breaks it down, saying goods purchased in any currency other than United States dollars will be converted first to US dollars, and then to Singapore dollars.
The US dollar is the intermediary currency, so conversion from a foreign currency to Singdollars usually involves two exchange rates that are determined by your credit card network. SingSaver gives an example: The euro is first converted to US dollars and then to Singdollars.
A conversion would look like this:. After the transaction is converted to Singdollars, the foreign transaction fee of 2. DBS notes all conversions are based on the prevailing wholesale interbank rates or the government-mandated rate, as determined by card associations such as Visa, MasterCard and American Express. These card associations are also known as scheme operators, payment networks or association networks.
The different types of fees when making a transaction in a shop overseas, on an overseas website, or on a website that uses either an overseas or local payment processor are mind-boggling. You have fees on transactions in foreign currencies, fees on Singdollar transactions processed overseas, bank administrative charges and charges by the payment network.
A United Overseas Bank spokesman said: Fees can usually be found in the credit card's terms and conditions. A Citibank spokesman said that different interest rates apply for items such as retail spend, a balance transfer or an equal payment plan.
This is an industry practice adopted by all banks in Singapore. A Maybank spokesman says: DBS says that all transactions in foreign currency are subject to a charge imposed by the networks - either as a reimbursement charge representing the charge imposed on the bank, or as a direct charge to the customer.
SingSaver said different credit cards incur different transactional charges and each bank has a different way of computing its charges. The three main ways are:. SingSaver co-founder Rohith Murthy says: OCBC calculates it as:. OCBC says the thing to watch out for is that the final sum to be paid will not be known to customers until they receive their statements.
It notes that across banks, a Visa or MasterCard charge of 1 per cent would come with a bank charge ranging from 1. Maybank also notes the market charges up to 3. It is a gross and costly misconception that paying in Singdollars would avoid foreign transaction fees, says SingSaver.
Some merchants overseas offer the option of making a transaction in Singapore dollars, and such transactions are known as dynamic currency conversion, where goods are converted from foreign currencies to Singdollars, says the portal. In fact, the MasterCard site listed dynamic currency conversion as the reason for businesses to boost their profit," added Mr Murthy.
Banks also stand to benefit, said a Business Times report. Dynamic currency conversion is a common service that online merchants or foreign sites use, so consumers should be aware. The Monetary Authority of Singapore and the Association of Banks in Singapore also said card issuers generally state that Singapore dollar payments routed through overseas payment processors attract additional service charges.
Payment processors include major names such as PayPal and Alipay, and The New York Times said they act as digital couriers between card issuers and merchants. OCBC adds that as long as the settlement is in a foreign country, depending on the currency cardholders opt to pay with, they will be charged either the dynamic currency conversion or foreign exchange rate. For instance, Uber uses the dynamic currency conversion as settlement is in the Netherlands, and cardholders are charged in Singdollars.
SingSaver added that even though products are priced in Singdollars or when you shop at a Singapore site - those that end with. Such fees will appear only in your credit statement. Mr Murthy said it tends to be more costly for you to charge Singdollars instead of foreign currency when you are overseas, simply because of the unfavourable exchange rates used by the merchants. You could look for cards to stretch your dollar, he said, noting that for CIMB, the 1.
For all other CIMB cards, 2. A golden rule when shopping overseas is to always opt to pay in the foreign country's currency as these fees - commonly known as dynamic conversion fees - are marked up even more by merchants. When making online purchases, always check the terms and conditions to find out if payments are collected or processed overseas.
It should be 1 per cent for both. We have been experiencing some problems with subscriber log-ins and apologise for the inconvenience caused. Until we resolve the issues, subscribers need not log in to access ST Digital articles. But a log-in is still required for our PDFs.
Skip to main content. Shopping scenarios and fees. A version of this article appeared in the print edition of The Sunday Times on July 17, , with the headline 'Paying for overseas purchases: Finding the best deal'. Getting only the best for your baby. Five award-winning restaurants for business lunch.More...