Knowing The Difference Between Foreign Exchange Fee And Currency Conversion Fee

People often got confused when some credit card fees comes in front of eyes. It is true thought that fees aren’t easy to explain. But when it comes to mostly common terms like currency conversion fees, forex transaction fee then it makes less sense. Because of their similarity while we read or speak about them.

Let’s make it clear- the key difference makes if you are aware of 2 end, who is the card issuer and who is the card payment processor.

FX fees are taken by the card issuer bank, conversion fees are taken by the bank/company who charges your card when you use the card.

It is possible that both type of fees are combined and called as forex fees, but sometimes the merchant company/organization charges additional fees from your card for using their machine. (Not often)

Learn About Foreign transaction fees:

Not only credit card issuer but also debit cards issuer took benefit from their consumers’ card usage. Especially when it comes to foreign transaction, no matter you’re making the transaction from your home or abroad, the FX fees will charge on your account. Fees may vary but usually it is between 2-3% of the amount you’re spending.

For example you’re making purchase of $100 goods from a store while they’re not using sane currency as your card was supposed to use. The shop will cost its own cost in its currency with an FX fee. Guess you’re using an ATM machine abroad, if you cash out five hundred USD you’ll get charged by your bank 515.00 USD, it will be based on 3% fees. If the charge is less then the cost will be around 10-15 USD for 500 equivalent money.

Same goes with other currency like SGD, EUR, JPY, GBP, CHF etc.

Learn about currency conversion fees:

Card payment processor has ATM networks which are controlled by banks or similar financial organizations. When we use credit or debit cards, there are two types of currency convert fees can be apply. If the process uses dynamic currency conversion or DCC then it will be vary depending on the size, type of payment, locality. Sometimes it could be more than 1% even 12% in some places.

If DCC costs more, you have the rights to refuse in POS terminal. (Point of sale)

Well, if you are smart you’ll ask the sale person to check FX fees, and it will be best before shopping. Best advice is to knowing the charges from already experienced friends/colleges or online forums. Also you can ask shop manager about the charge or XE currency rate application.

Fee Type

Imposed On

Imposed By

Rate

Foreign Transaction

Overseas credit card transactions

Issuer

2% to 3%

Currency Conversion

Overseas currency conversion

Processor

1%

Dynamic Currency Conversion

Overseas point-of-sale conversion

Merchant

3% to 12%

Tips to avoid unnecessary fees:

Call your bank helpline and quickly learn about your card foreign transaction fees in abroad ATM. If you got enough time to apply for a new card, ask the customer care manager if they have a no fee card in your current financial statements. Also you should check the terms and conditions charges sections to know how much money they will cut for foreign transaction.

  • Have some cash in your hand to avoid immediate ATM usage fees while abroad.
  • Get a currency exchange app or google it before shopping.
  • Always care about low cost global ATM networks. Use google maps to know available ATMs near you.

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