Be­ware cur­rency con­ver­sion fees

Waikato Times - - Business - Su­san Ed­munds

Shop­pers buy­ing from over­seas web­sites, and New Zealan­ders trav­el­ling abroad, are be­ing pinged for ev­ery item they put on their credit cards. But how much they pay in fees varies sig­nif­i­cantly.

Shop­pers are charged cur­rency con­ver­sion fees when they buy some­thing in a for­eign cur­rency.

But find­ings from fi­nan­cial prod­uct re­search site MoneyHub shows those credit card con­ver­sion fees range from 1.85 per cent on Ki­wibank’s Master­card to 3.5 per cent on a PrezzyCard.

Re­searcher Christo­pher Walsh said most banks charged about 2.5 per cent.

‘‘While this doesn’t sound like much, the fees add up over the course of a hol­i­day or when buy­ing some­thing from out­side of New Zealand,’’ he said.

‘‘De­spite debit and credit card cur­rency con­ver­sions be­ing pro­vided by Amex, Master­card and Visa who convert each pur­chase into New Zealand dollars us­ing their own FX rates, banks are hun­gry for their cut of each trans­ac­tion too.’’

A cus­tomer of a New Zealand bank who trav­elled over­seas and spent $2000 on their card could ex­pect to pay about $50 in for­eign ex­change con­ver­sion fees.

‘‘If cash is with­drawn from an over­seas ATM us­ing a debit card, the to­tal fees can be sig­nif­i­cantly higher. Some banks charged up to $7.50 per with­drawal plus a 2.5 per cent com­mis­sion, mean­ing that tak­ing out $200 over­seas would cost as much as $12.50 in bank fees, which seems very high.

‘‘Cus­tomers don’t need to travel over­seas to in­cur these fees. The boom in on­line shop­ping means any­one or­der­ing items from over­seas us­ing a debit or credit card will be charged the same cur­rency con­ver­sion fees by their bank as if they were phys­i­cally in the coun­try.’’

He said MoneyHub re­search showed Ki­wibank and ASB had the best value, at 1.85 per cent and

2.1 per cent, re­spec­tively.

ANZ, TSB and West­pac charged 2.5 per cent. Debit cards of­ten had higher fees again, up to 2.8 per cent.

Flight Cen­tre and Flex­iGroup this week launched a card with no in­ter­na­tional trans­ac­tion fees – the Flight Cen­tre Master­card. It has an an­nual fee of $50 and the Flight Cen­tre re­wards scheme rather than cash back op­tions or con­sumer re­wards other cards might of­fer.

Bank­ing com­men­ta­tor Claire Matthews, of Massey Univer­sity, said the vari­a­tion in charges would de­pend on how banks at­trib­uted over­heads across their ac­tiv­i­ties, the profit mar­gin they in­cluded and some economies of scale.

‘‘I would ex­pect them to be sim­i­lar but not iden­ti­cal.’’

Prashant Trivedy, of fi­nan­cial com­par­i­son web­site Pock­et­wise, said over­seas spend­ing on New Zealand-is­sued cards had in­creased 60 per cent over the past five years.

‘‘With more peo­ple us­ing their credit cards for their ev­ery­day ex­penses, it’s im­por­tant for them to un­der­stand the costs as­so­ci­ated with this.

‘‘Un­for­tu­nately, most peo­ple are only aware of the sur­face costs, but not the other hid­den costs, such as ex­change rates, and re­fund poli­cies when mak­ing pur­chases on­line.’’

A con­sumer want­ing a re­fund on an in­ter­na­tional pur­chase might not get their cur­rency con­ver­sion fee back.

‘‘Some cards re­fund you only the pur­chase amount and not the cur­rency con­ver­sion charge. A few other cards charge you con­ver­sion costs even on your re­funded pur­chase amount. Typ­i­cally these terms will de­pend on the provider of the credit card fa­cil­ity. While con­ver­sion charges and re­fund poli­cies on each in­di­vid­ual trans­ac­tion may not feel painful, over time these not-so-ob­vi­ous charges can grow to a sub­stan­tial amount over a num­ber of pur­chases.’’

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