Saturday, May 15, 2010

Credit card charges

Hi Kin Lian,
I would like to share what I found out about this. Credit card companies charge an administrative fee of 1.25% onwards to card users for transactions in non SGD currencies. Maybank charges 1.25% as does RBS. I think the rate charged by Citibank and DBS are 1.5%. This is on top of the 1% charged by VISA/ Mastercard.

So let's say I buy something online in USD, and the exchange rate determined by VISA for the posted date is USD 1 = SGD 1.40. The charge I receive will be 2.25% on top of that.

Now, if I buy in a non USD currency say GBP, the GBP charge will be converted to USD first, then USD to SGD so resulting in an extremely unfavourable rate.

There's not much transparency regarding this and I obtained this information after I questioned my bank about it. Hoping you can help educate the public especially your blog readers on this. Thanks.
I am not able to verify this fact. Can other readers share you experience?


EC said...

Yes there has been calls for banks to be more transparent about these foreign transactions charges but to no avail.

Frequently the % are hidden within the fine print of the T&C of the credit cards which may be several pages long; I think most people don't bother to read them.

I think the range of 1.5-2.5% charged by the banks are the norm although I cannot verify the exact % for each bank.

Yes I can verify that foreign currencies other than USD are first converted to USD then to SGD based on the exchange rates- as to whether more charges are incurred due to this is unclear because the exact % imposed by the banks/VISA or MasterCard are never disclosed in the statements.

EC said...

Further to my earlier comment,

From UOB:

4.4 Card transactions in foreign currencies other than US Dollars, will be converted into US Dollars before being converted into your card billing currency based on the prevailing exchange rate determined by the relevant card associations (including but not limited to Visa, MasterCard, JCB International, China Unionpay and American Express).

For Visa, MasterCard, JCB International and China Union Pay credit cards, all transactions in foreign currencies will be subject to an administrative fee of 2.5% (or such other rate as determined by us or the relevant card association) levied by us and the applicable card associations.

All MasterCard transactions effected in Singapore dollars and processed overseas are levied an additional fee of 0.8% by MasterCard International.
For foreign charges converted by American Express, a foreign currency factor of 3.25% will be added to the converted amount, 1.25% of which will be retained by American Express.

From DBS:

Transactions in US dollars shall be converted to Singapore dollars on the date of conversion. Transactions in foreign currency other than US Dollars will be converted into US dollars before being converted into Singapore dollars. All conversions shall be based on the prevailing wholesale interbank rates or the government-mandated rate, as shall be determined by the respective card associations, namely VISA International, MasterCard International & American Express International, Inc. The rate used for the conversion may be different from the rate in effect on the date of the transaction due to market fluctuation.

All transactions in foreign currency are subject to a charge imposed by the respective card associations, either as a reimbursement charge representing the charge imposed on us or as a direct charge to you. For foreign charges converted by American Express, American Express applies a conversion factor of 1% to the converted amount.

An administrative fee for services provided or actions taken by us in relation to such foreign currency transactions shall be payable by you and debited to your Card Account. The prevailing administrative fee is 1.5% of the foreign currency transaction amount for transactions involving VISA International and MasterCard International and 2% of the foreign currency transaction amount for transactions involving American Express International, Inc.

Anonymous said...

I don't think we can label the banks as not being transparent as you are able to get the charges from their T&C.

For sure, don't expect the banks to put up a one-page advertisement to announce such charges!

Traveller said...

Yes, its a fact.
Credit card transactions are billed in US$ regardless where it occurred:
i.e on line or outside of SIN and reconverted back to SIN$.
Customers are at a disadvantage here, since there are 2 exchange rates used, and on top of that a further percentage from "relevant" associations.

I try to pay as much as possible via cash. For hotel bookings I will use credit cards but on check out, cash is used. These are my personal expenses and I do not have a company to charge to!

If you visit a city often, open a bank account and put some money there ( about 5K equivilent or less )with internet banking. Find out about costs and charges for closing the acoount.

Since the Euro has dropped, perhaps buy about 2K and stash it in your drawer.

Anonymous said...

This is my experience, I bought an item online at $130 USD on 02/07/2010, was informed by bank the rate use will be the posted rate on 02/09/2010 determined by Visa

My bank statement did not reveal the rate used, I derived the rate by division of billed amount with purchased amount in foreign currency.
On my statement,I was billed $191.33 SGD so the final rate about 1.4718. I was very puzzled by the high rate, I decided to do my calculation.

One can check the Visa rate from

For my case, I get the base rate of 1 USD to 1.423225 SGD from Visa site at 0% 02/09/2010

As my statement only contains the purchase fee in USD, and bill in SG,
If visa charge 1%, and my bank informed me that they charge 1.5%, I can only try to guess and determine the possible outcomes.

If bank will to charge 1.5 on purchase, before posting to Visa for conversion
(130 * 1.015) * (1.423225 * 1.01) = 189.67

If bank charge 2.5 on purchase, before post to visa (agreement btw Visa and Bank)
(130 * 1.025) * 1.423225 = 189.644

bank post to visa, visa applied 2.5% on purchase after conversion (agreement btw Visa and Bank)
(130 * 1.423225) * 1.025 = 189.644

bank post to visa, visa applied 1% on purchase, return to bank, bank imposed 1.5%
(130 * 1.423225 * 1.01) * 1.015 =189.67

The final rate shall be either 1.459 or 1.4588.

The statement is unclear, it lack details and outcome at each level of fee imposed.
Why do the consumer need to know where to retrieve these informations?
These information shall be included in the statement.
The worst is the discrepancy in charges for my case, the extra unknown fee was unable to determine...

As I am no banking person, feel free to correct my above statements.

EC said...

@ Anon May 16, 2010 3:04 PM

Yes I had similar experiences through the use of debit card. I would imagine that it is similar to a credit card in terms of foreign currency transactions.

Until now I hadn't been able to figure exactly how they derived the final cost. It's always higher than what I calculated.

This is what I meant by the lack of transparency because the statement only shows the cost in foreign currency and the final cost in SGD without reference to any exchange rate or embedded charges. Customers are left to calculate the effective exchange rate and even then the charges don't add up.

This is my experience so far and if anybody is able to know how it actually works please comment.

Parka said...

I'm using UOB VISA, charges are 1.5% for UOB and 1% for VISA respectively.

Anonymous said...

Do any of you feel that the banks is overcharging the admin fee.

Visa charge 1% for doing the work.
Local banks charge > 1.5% for admin fee? What admin are they doing that require a much higher charge? Some more we are already paying annual card fee.

Anonymous said...

From UOB

"For foreign charges converted by American Express, a foreign currency factor of 3.25% will be added to the converted amount, 1.25% of which will be retained by American Express."

Form DBS

"For foreign charges converted by American Express, American Express applies a conversion factor of 1% to the converted amount."

Anyone notice the different. Is one bank applying compound fee while the other is not.

Classic Double charge,fee exploitation..

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