Abroad


J

Jaz Boyle

When withdrawing funds abroad what do banks etc base their currency exchange
rates on? Is there anyway to view this info in advance.



JB
 
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C

Chris Blunt

When withdrawing funds abroad what do banks etc base their currency exchange
rates on? Is there anyway to view this info in advance.
They base them on the current wholesale exchange rate as determined by
the markets at the time the transaction is processed. Unfortunately,
you can't view those rates in advance without a good crystal ball.
They then build into that some markup which they make a profit from.
This varies from one bank to another, but is usually between almost
zero and about 3%.

Chris
 
A

Alec

Chris Blunt said:
They base them on the current wholesale exchange rate as determined by
the markets at the time the transaction is processed. Unfortunately,
you can't view those rates in advance without a good crystal ball.
They then build into that some markup which they make a profit from.
This varies from one bank to another, but is usually between almost
zero and about 3%.
The rate they base on is usually the rate determined by Visa/Mastercard once
a day (or the next business day if after hours or weekend). It's pretty
close to the interbank closing rate you see online like www.oanda.com or
www.ft.com , with a small mark-up (up to 1%). But already stated, your bank
or card issuer (other than Nationwide and Liverpool & Victoria) will tuck on
extra commission (which varies - the total comes to around 2.75% above
interbank) - you don't see this as it's incorporated into the exchange rate
used. So to give an example, if £/euro interbank rate is £0.6698 to the euro
(as it was on Friday), most cards will use 0.6698+ 2.75% = 0.6882. Plus most
issuers (again with the exception of NW and L&V) will add cash handling fee
of around 1.5% (min £1.50), which will push the effective rate to 0.6982. So
when withdrawing 200 euro, you will be charged around £133.96 with NW and
L&V and £139.64 with most other cards.

Alec
 
T

Tim

... add cash handling fee of **around**
1.5% ... will push the effective rate to 0.6982.
That reminds me of the old joke:

[In a museum...]
Kid: How old is that dinosaur?
Curator: It's 65 million and ten years old!
Kid: Gosh! How can you be so accurate?
Curator: Well, I was told it was 65 million years old when I started here;
that was ten years ago...
 
C

Chris Blunt

The rate they base on is usually the rate determined by Visa/Mastercard once
a day (or the next business day if after hours or weekend). It's pretty
close to the interbank closing rate you see online like www.oanda.com or
www.ft.com , with a small mark-up (up to 1%). But already stated, your bank
or card issuer (other than Nationwide and Liverpool & Victoria) will tuck on
extra commission (which varies - the total comes to around 2.75% above
interbank) - you don't see this as it's incorporated into the exchange rate
used. So to give an example, if £/euro interbank rate is £0.6698 to the euro
(as it was on Friday), most cards will use 0.6698+ 2.75% = 0.6882. Plus most
issuers (again with the exception of NW and L&V) will add cash handling fee
of around 1.5% (min £1.50), which will push the effective rate to 0.6982. So
when withdrawing 200 euro, you will be charged around £133.96 with NW and
L&V and £139.64 with most other cards.
You're right to correct me about the source of the rate, although in
practice the Visa/Mastercard rate is actually almost the same as the
interbank rate. I feel sure its somewhat less than the 1% figure you
mentioned. Also, I think the exchange rate they use varies
continuously throughout the day. I've sometimes had multiple overseas
transaction appear on my statement on the same day, and they each show
a slightly different rate of exchange.

Chris
 
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A

Andy Pandy

Chris Blunt said:
You're right to correct me about the source of the rate, although in
practice the Visa/Mastercard rate is actually almost the same as the
interbank rate. I feel sure its somewhat less than the 1% figure you
mentioned.
I think it depends which country, IIRC the markup is lower in Europe than the
rest of the world. Also I've read that Visa/Mastercard, as well as some banks,
are switching most of the exchange rate markup fee to "foreign use" fees,
because their profits are being hit by DCC becoming more prevalent. With a bit
of luck, this might lead to the death of DCC.
 
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