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Tuesday, June 9, 2015

Credit Card Usage Oversea or Online

I am writing this based on myself living in Singapore using a Singapore Credit Card issued by the banks in Singapore Dollars (SGD).  You however can also checkout the information in your respective counties.  The concept works almost the same.

Many of us travel overseas.  We know we can use our Credit Card overseas with convenient.  Often when you made a purchase while overseas, do you encounter why retail counters often ask if you like to pay your purchase in their foreign currency or Singapore Dollars.

So I did a asked on my Facebook and see what was everyone's choice.  Guess what?  Everyone chosen foreign currency where they are at.  So is this the best choice?

Most of us like myself isn't aware.  Paying something in foreign currency do incur charges from the bank that issue you.  The percentage however are mostly the same except for one or two special credit cards.  I am not going to sniff one particular card.  Below is the list of banks direct pages of charges out of which Standard Chartered has the highest transaction fee for foreign currency payment using VISA or Master

Here you can refer to the various bank terms and conditions.  There was none from OCBC.
Citibank, DBS/POSB, UOB, Standard Chartered

Other than AMEX which have a high charge for transaction fee, the rest for VISA and Master are as follows.  I will use a purchase I made in Paris recently to use as illustration.

Note:
  • All purchased made in foreign currency, the currency will be converted to USD then to SGD and the total will have a transaction fee of 2.5% based on the sum.  You will be subjected to the spread by the bank on the currency paid to USD and from USD to SGD.
  • For payment in SGD outside Singapore, including purchase made online e.g. Amazon or using Paypal where their retailer uses a foreign payment, there will be a 0.8% transaction fee of the total sum.
Scenario 1
I paid for an item for EUR79 and my credit card bill came as SGD124.30.  This was after a 2.5% transaction fee.  Most people if not aware will divide out and thought it was 1.57 exchange rate.  The actual amount is actually SGD121.258 (exchange rate after two conversion 1.53) before the 2.5% transaction fee.

I was also offered at the cashier to pay for SGD123.55 (exchange of 1.564) before a transaction fee of 0.8%.  If I were to pay in SGD, my credit bill will reflect SGD124.538 (taking transaction fee would be 1.576).

In this case, my purchase made in foreign currency is better than paid in SGD with a saving of SGD0.20.

Summary
From the above, it seems that paying in foreign currency favours the buyer.  At the time of my purchase, the exchange rate by the bank for EURO to USD and USD to SGD was lower than what the spread that the retailer exchange offered me (1.53<1.56) or after transaction fee ratio (1.57<1.576).

This amount can change if the exchange rate does not favour you, payment in foreign currency will made you loses.

So which should you choose, since Forex changes everyday, you can do your homework.  Just choose the currency that you like honestly.  Of course if you are in US, please pay using USD as you will only lose one conversion rate and normally bank rate are better than the retail rate.

The difference is minimal so for convenient sake, you might just pay in foreign currency since you know the bank rates are never as bad as the retail rate.


Update 13th Dec 2015
Here back again to update this post.  Apparently though reading that AMEX has a high transaction rate but the exchange rate overall including the rate in EUR was lower than Citibank VISA.  Doing a check at EUR/SGD, there was slowly increasing from 7-12 Dec.  I did some spending on Citibank VISA on 7th Dec and on AMEX on 8th Dec, and another CITIBANK VISA on 11th Dec.  The rate for both Citibank VISA was higher than AMEX even though the EUR/SGD rate was going up over these few days.  Seems like spending overseas might be better to use AMEX after all.

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