# Do credit cards do dishonest FX?



## james4beach (Nov 15, 2012)

I'm starting to suspect that Mastercard plays FX games and doesn't charge the honest 2.5% forex fee they're supposed to be doing.

Every time I buy something in US dollars, I record the spot forex rate on that day. Of course USD/CAD varies during the day but I'm sampling it at a pretty random time, just to fill in my spreadsheet.

I know that my CAD estimate (after 2.5% fee) won't match exactly, but I would expect over time that it's sometimes high, sometimes low, and on average pretty close to 0% too high.

Here's what I calculate for 60 charges this year. This is a measure of the % difference between what mastercard charges versus my estimate.

average = 0.35% extra charge versus my estimate
median = 0.34% showing it's not off due to outliers

Anyone else observe this too? I think we're being ripped off. I'm planning on crunching my numbers going back many years.


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## Spudd (Oct 11, 2011)

Get the Amazon.ca visa, they don't charge FX.


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## brad (May 22, 2009)

I always assumed they do what banks do: they charge a forex fee plus they make profit on the spread (the foreign exchange rate you actually get is not the same as the official rate). This is also how banks and services that say "no fee for foreign exchange" make money: they may not charge a fee, but they make money on the spread.


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## kcowan (Jul 1, 2010)

I would be interested to see a similar exercise for the Amazon card. What spot rate are they giving their customers?


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## fraser (May 15, 2010)

I have one of the two Chase cards (Marriott and amazon). We often have FX transactions. 

I have checked the Chase card a few times. It always seems to be within 1/5-1/10th of one percent of the daily FX rate so I assume this has to do with the time the transactions was posted. Much, much better than my day to day CIBC Visa.


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## Addy (Mar 12, 2010)

Can you request from Mastercard what data they use and what formula?


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## fraser (May 15, 2010)

It is very easy to check. Your statement will show the exchange rate that the was used on that day, ie the day of the posting. Simply go to the FX tables and get the average exchange rate for that day. Add 2.5 percent to the rate and you should be there. Keep in mind that the rate constantly changes a little during the day so the exact rate may depend on the time of day that the transaction was posted.

So, I had a Sept 23/2013 posting on Visa. The US exchange rate used was 1.057080. The actual FX rate that day was 1.0302. That is a 2.68 percent spread. 

We do anywhere between 10-15 thousand dollars worth of foreign transactions each year on our credit card. Using the Chase card saves us anywhere from $250-$375 per year in bank card fees.


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## PoolAndRapid (Dec 3, 2013)

..


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## fraser (May 15, 2010)

I just checked a few of mine. I was not aware that Visa sets the rate once. I have a few charges posted on the same day that all carry a slightly different exchange rate.

The other thing I noticed is that Chase goes to 9 decimal points. My CIBC Visa goes to 6 decimal points.


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## financialuproar (Jan 26, 2010)

On $1000 worth of charges, we're talking $3.50 in extra fees. Just enough to make it worth their time and not have anyone complain/notice. Kinda smart actually.


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## uptoolate (Oct 9, 2011)

Why I finally broke down and just got a USD Visa. Got tired of the banditry.


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## Rusty O'Toole (Feb 1, 2012)

If a big bank or corporation does it, it's not dishonest. We've been through all this in the high speed trading thread and many other places. Yes, I am being sarcastic.


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