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Do all credit cards and atm debit cards use the same interbank rate?

I've learned a lot from reading old posts, but still have one question. I'm uncertain about the interbank rates. My American Express and Discover cards say they have zero foreign transaction fees, and my local bank, atm debit card, has 1%.
Questions

  1. So theoretically, if I buy something on AEx and right after that charge the same amount on Discover, it should show up on my statements as the same amount since the interbank rate is the same for everyone, and they both claim zero fees?
  2. If #1 is true, why did someone say in a post that they were "shopping for euros" and prices she found that day (in her US
    hometown) were Local bank 1.18 E

    Bank of America 1.24E
    Wells Fargo 1.12E
    If the exchange rate is the same for everyone, why the difference? I understand some places charge transaction fees, but those should be stated and separate, correct?

  3. When we used our Discover in Canada last trip, I checked the xe.com rate everyday, and never on my statement did I actually
    receive that rate for something I purchased. It was always higher.
    Why? and lastly

  4. Since different banks/cc companies apparently charge different conversion rates, not all the same interbank rate, how can you
    compare who is giving the best rate consistently to know which card
    to get? What are the "right" questions to ask if they say they
    carge no markup? Discover and AEX seem to be not so popular in
    Italy, so I have to get a new Visa card anyway.

Trying to make an informed decision.
Thanks so much! Really trying to learn how currency conversion works, and I've already learned so much from reading your responses to previous questions.

Posted by
10257 posts

You mention the Discover card. Here's what Rick has to say about that: "the Discover card is unknown in Europe."

Posted by
2040 posts

Oversimplifying: The rate you see published for a specific day is the average rate during the day, the rates have constant fluctuations. Your charge would post at the rate at that moment. But that is for a purchase, or withdrawal of cash via a debit card. For withdrawals of cash at an ATM from your account via an interbank system such as Plus or Cirrus, there appears to be a built in cost of about .6 to .8 of 1 percent above the actual exchange rate, which shows as an exchange rate that is that much higher, as in if 100 euro cost $120 according to the interbank rate, it will probably show as a withdrawal of say, $120.90 because of that internal friction. This is exclusive of ATM fees, or foreign transaction fees of 3% on credit cards.

Buying Euro, that's a whole other story. There's not just the exchange rate, but also the mark-up/commission/whatever you want to call it. And any entity can charge whatever additional fee they want.

Posted by
4821 posts

I can try and answer some of your questions, but to be honest, I can not account for a specific card or transaction you had. Warning for all, a bit long winded.

First, very basic, any transaction has a cost, so any conversion will be more than the interbank exchange rate (outside of variation in the actual exchange rate throughout the day), the question in the end is how much is that cost.

Second, forget terms like "fees", "rates", "exchange", "commision", etc. They are all costs. The basic calculation is: for X amount of (euro, Canadian dollars, whatever); how many Dollars did it cost.

Third: Costs can be broken down into two types "per transaction" meaning a flat fee per transaction, and a "percent of transation", usually an exchange or transaction rate.

Finally, these costs can occur or are imposed by:
- The merchant, vendor, or owner of the terminal you make the transaction at
- The Network that handles the transaction
- Your bank or credit card company

Given all of the above, and all of the possible combinations, it truly can be very confusing, but here are some possibilities to consider.

Merchant/Vendor fees: Generally, in Europe, the merchant does not charge a fee for using a credit card or even a fee at an ATM. You very well may run into a tactic known as Dynamic Currency Conversion (DCC) where instead of the merchant or ATM completing the transaction in the local currency, they kindly offer to do the transaction in your currency (Dollars) usually at a rate of their choosing (maybe $1.24 per euro vs the current $1.13, about a 10% cost) Other places it might be a $3 fee for using an ATM. The more you decline these costs, the better you are.

Network Costs: These tend to be fairly consistent. For the Cirrus, Plus, Maestro...all charge a percent of costs that total about 1%

Your Bank/CC: They can actually be the worst, or at least the hardest to avoid without switching, the most common is a 3% cost on foreign transactions, but it may also be just a flat cost for doing a transaction, or a monthly/yearly fee for using the card.

All that said, you need to break out your costs into each category and evaluate. Some examples from my travels:

When I use my ATM card, I always decline any DCC, I know I will have a cost of about 1% over interbank rate chrged by the network, and my bank cherges me nothing, except maybe a monthly fee if I go over so many transactions.

I used to have a credit card that charged a 3% foriegn transaction fee, but not now, so total cost is just over 1%, plus any interest if I fail to pay off the balance.

Exchanging money in the US at a bank before I go....best I found is Wells Fargo, no flat fee, but the exchange cost is about 5% over interbank rate.

Exchanging money at an exchange bureau, sometimes a flat fee, sometimes a "commision" noted as a percent of the transaction, and always a percent cost for conversion (exchange rate) typically totaling about 10% over interbank rate. If you really want to waste money, use a credit card with a 3% fee and do it as a cash advance at an exchange bureau.

In the end, understand what your bank/card charges for costs, be aware of DCC and other costs by a vendor, and eliminate as many variables as possible to get the lowest cost.

Posted by
507 posts

This is the text Southern girl refers to about buying euros. It was my post.

This is the shopping I did for Euros last week.
Euro 1.15
Chase 1.23
Regions. Must be client
Wells Faro. 1.21
Notice the banks will charge 6 to 8 cents more than the XE.com rate.

1) I am bank shopping for $200 of euros for an upcoming trip. The text shows that the two banks who would give me their price for a euro would add 6 to 8 cents per euro I purchase. That day the Euro to dollar rate was 1€:$1.15.

2) When you went to Canada you may have fallen victim to a DCC which was described above. At a restaurant a waiter might have brought you your dinner ticket already in USD ($). The restaurant did the conversion for you as well as tacking on a percentage for the business.

That is why you will read that travellers will send back a bill to be recalculated in that country's currency, not in USD ($). It is said over & over to pay in the currency of the country you are in, not in your home currency.. (This is a lesson I learned the hard way. Another story for another day.)

3). Save your Discover card for when you travel to Asia. China especially likes the Discover Card I understand.

4) I have a VISA Travel Credit Card from Bank of America that carries no foreign transaction fees & 0 APR on purchases for the first year. It is a chip 'n signature card; you can request a PIN should you be traveling to Europe. The PIN will be necessary for self-serve gas stations & kiosks.

I also carry a VISA debit card w/chip. When I use it in Europe I will be careful to ask for withdrawals in euros at ATMs & not accept "home currency" b/c of DCC. The ATMs I use will be bank-owned ATMs only b/c they give the best conversion rate.

I hope all your questions were answered by other posters.

Posted by
2762 posts

My understanding of Chip and Signature cards like Collette's Bank of America one is that if they give you a PIN it works with the magnetic strip, NOT the chip. So it still will not work in kiosks and unattended machines like gas stations.

You can use it in ATM's to withdraw money but then it is treated like a cash advance and incurs fees.

Our new Bank of America visa card has a chip too, but still requires a signature. We don't have a PIN for it and won't use one if we did.

Posted by
4687 posts

Sasha, I guess you've proved the American banks right in assuming that we can't be bothered with a new PIN to remember! So they've made Signature the primary response to newly-issued Chip cards here. But when you are trying to add money to your Paris transit card, or buy train tickets from a kiosk in Germany (because there are 25 people in each line-up for a human), or you're trying to buy gasoline at an unattended pump in France or Belgium, you'll wish you had a PIN for the Chip-card.

Posted by
9361 posts

As Tim said, chip and signature cards have been shown to work, in some cases, in chip and PIN applications like kiosks. It's always a good idea to know the PIN, since it doesn't hurt anything to try it as a chip and PIN. The only reason not to do so would be in an ATM, where a withdrawal would be treated as a high-cost "cash advance".

Posted by
16769 posts

Banks give the interbank rate to each other; they do not give it to customers. It is their business to make money on every exchange. When you view rates at www.oanda.com and other sites, you can select "typical debit card rate" or "typical credit card rate" to get a better idea of rates you should expect to pay. These are still better than the rates to exchange cash in person.

Posted by
5498 posts

Here are some links with more than most would want to know:

Visa Credit Card Exchange Rage FAQ:
http://usa.visa.com/personal/card-benefits/travel/exchange-rates-faq.jsp

Will the rates shown be the rates charged to my account? The exact
rate you receive depends on when the transaction is posted to the Visa
system. The day the charge actually posts may be later than the day on
which you made the purchase, depending on how promptly each merchant
handles their Visa transactions. How does Visa calculate its rate?
Every day—except weekends, Memorial Day, Christmas Day and New Year's
Day—Visa calculates the rate for the next day's transactions. The Visa
rate is selected from a range of rates available in wholesale currency
markets or the government-mandated rate in effect one day prior to the
applicable central processing date.
Visa makes this rate available to
issuing banks, which may adjust the rate when billing cardholders by
applying a foreign transaction fee.
The rate Visa makes available to
issuing banks may vary from the rate Visa itself receives. Most
consumers find that using Visa is a convenient and cost-effective way
to make purchases and obtain cash when traveling internationally.

Foreign exchange terminology:
http://currencysystem.com/kb/13-138

Dealers and brokers, when acting as market makers, provide two prices:
a bid (or buy) and an ask (or sell). Once given, the quote is binding
(for a few seconds), i.e. the market maker will buy foreign exchange
at the bid quote and sell at the ask quote. The arithmetic average of
the bid rate and the ask rate is called the mid rate (or middle rate,
or midpoint rate). As part of normal trading, bid prices are lower
than ask prices. When quotes are displayed as pairs, the bid price is
on the left side, and the ask price is on the right side. For example,
for a EUR/USD quote of "1.2321/45", the bid price is 1.2321 and the
ask price is 1.2345. This means you can sell one euro for $1.2321, or
you can buy one euro for $1.2345.

The difference between the bid and the ask is the spread. Market
makers make a profit from the bid-ask spread. Bid-ask spreads can
usually range between 0.03% and 0.07%, which is significantly lower
than spreads in other financial markets, but which is compensated by
the high volume in the foreign exchange market (about ten times the
volume of international trade in goods and services).

Commercial banks account for the largest proportion of total trading
volume. About three quarters of all foreign exchange trading is
between banks. These transactions are called interbank or direct
dealing transactions
. Direct dealing saves the commission charged by
brokers.

Posted by
30 posts

Edgar and Laura that is exactly the information I was seeking! Thank you. When I called my Am Express (who said they had zero foreign transaction fees) they transferred me around. Then the "expert" rep told me that whatever the rate I saw on XE.com, that was the rate they charged, and that was EXACTLY the same rate every single credit card company would charge me. I knew this was wrong. I tried to explain, but he just became huffy with me. So, it looks like my question #4 is not something I am going to be able to compare, but with that part of onada.com that says "typical debit cards rate" and "typical credit card rate", I think I can have a better shot at figuring out who is charging what. Thank you!!!!

Posted by
2762 posts

Hi Nancy and Tim,

This is from the Bank Of America's FAQ section on their "chip and signature" cards:

"Using chip credit cards

"How does a chip credit card work?
It's easy. If the retailer has a chip-enabled terminal, simply insert your chip card face up in the terminal. The chip card will remain in the terminal while the transaction is processed. To authorize your transaction, just follow the prompts on the terminal as you do today.
You'll be prompted for a signature to complete the purchase. When traveling internationally, on rare occasions, you may be asked to provide a PIN. Just communicate to the merchant that the credit card requires a signature only.Your card is available to be removed from the terminal once the transaction is completed.
If the retailer is not equipped to read the chip card, just swipe as you do today. For transactions made over the phone or online, nothing changes.

"Do I need a PIN to make purchase with my credit card? What is Chip & Signature and Chip & PIN?
No, you do not need a PIN to make purchases with your credit card. The term "PIN" or "Signature" simply refers to how you will authorize the transaction – by entering a PIN or by providing your signature. When using your Bank of America chip credit card, you'll be prompted for a signature to complete the transaction. When traveling internationally, on rare occasions, you may be asked to provide a PIN. Just communicate to the merchant that the credit card requires a signature only. Bank of America doesn't currently offer consumer credit cards that include PIN authorization for purchases.
The enhanced security against counterfeiting is contained within the chip itself. The chip makes the transaction more secure by encrypting information when completing a transaction at a chip-enabled terminal. As a result, both Chip & PIN and Chip & Signature offer enhanced security against counterfeiting.
You may request an ATM PIN for cash transactions by calling the number on the back of your card. This PIN is for ATM cash transactions only. This is not the same as Chip & PIN and will not work for purchases."

They clearly differentiate between Chip and PIN and Chip and Signature, and explain that the PIN on their card is only for ATMs---it will not work for purchases. This information is specific to the Bank of America card that Collette mentioned, and to our B of A chip card.

So maybe someone has reported a Chip and Signature card that works in kiosks with the PIN, but my guess is that somehow it functioned like an ATM and the person was charged a cash advance fee. It would be nice to know more details.

I am confident that we will not use the PIN with our B of A Chip and Signature card because of that cash advance fee. It works fine where the merchant has a machine that spits out a receipt to sign.

And no worries Tim about gas pumps or ticket machines that require Chip and Pin as we have one of those too---a true Chip and PIN from USAA.

Posted by
507 posts

I will learn on my next trip if the PIN on my credit card is beneficial to me. :-).

Everything on the BoA website is applicable to using the card in the USA; cash advances apply to overseas, also. If a merchant on my trip has a machine that accepts a PIN, I will use it.

A PIN is more secure than a signature. (When was the last time you were asked for your driver's license to verify your signature?) I have also requested the PIN be the primary means of validation with my signature being the secondary means of validation.

My Merrill Lynch advisor assures me I will not incur any fees on my Travel Card. He will deal with them. And I do not plan to use it in an ATM. :-)

Posted by
4821 posts

Just some comments that may clear up some of the issues and comments regarding chip cards.

Most Chip (EMV) cards issued in the US are Chip and signature, meaning a terminal with a chip reader will read them, but spit out a receipt for signature. Most terminals will also accept a mag strip, and require a signature.

If you have one of the rare Chip and Pin cards issued, You may still be asked for a signature, based on the workings of the card and the preferences of the terminal

Each EMV card has a "list" of CVM "Card/Credit Validation Methods" that in the US might be...Signature, Online PIN, Offline PIN, and None

When you use your card and the terminal accepts signatures, you will be asked for a signature, if it is a terminal like a ticket kiosk, and it only accepts PINs and you have one, it will ask for the PIN. If not, you may not be able to make the transaction.

There is also the option of no validation (none), usually based on some low dollar amount. As an example, I was able to use my Chip and Signature card in kiosks in the London Underground to top up my Oyster card with no PIN or validation.

Also as someone mentioned, a signature, whether they ask for a drivers license or not, is no validation, as the card issuer will still "validate" the transaction, either at that time or later in the day or the next day. This is also why some merchants in Europe may be reluctant to accept a signature, since over there, they may be more liable for accepting the transaction (in the case of a PIN they are protected)

Posted by
17653 posts

I haven't thoroughly read everything in this thread. Hopefully I'm not repeating what someone else said.

The Interbank rate is constantly varying during the day. What you see posted in the paper might be the rate at the end of the day, not the high or low during the day. Read the small print on you bank card agreement. The bank doesn't have to take the rate at the exact instance you made the purchase; they can take whatever the rate they want was over some designated period. This would apply to using you card at an ATM or POS. Also be careful about what they mean "no fees". They might consider as a fee only the fixed "fee" that banks charge when you use a "foreign" ATM, usually $2 to $5. They might not consider the exchange rate discount, which is a percentage, to be a fee. In Rick's Travel Skills video he mentions about exchange bureaus, "places with good rates have high fees; places with no fees have bad rates".

The rates you see online for obtaining foreign currency over here (Wells Fargo, Bank of America, Chase, etc) will have rates other than the Interbank rate. These are usually set for the day in the morning before business hours and don't change during the day, but the Interbank rate does. Some years ago I tracked the rates for B of A and WF for about half a year. WF's rate averaged 5% over the Interbank rate, B of A was about 5½% over.

Posted by
1 posts

for the past 30 days i tried to figure out fees charged by spanish atms on usd debit cards. i live in spain off an us debit card. the card is from mb financial, a regional midwest bank from chicago.

i go to the atm and withdraw 440 euros. they give me a choice, conversion done by your bank in us - press '' eur'' or conversion done by the atm owning bank in spain, press '' usd''. always pressed eur, my bank in us buys the eur for me. today i tried deutsche bank. first atm was smashed, common thing in bcn, anti eviction movement. the second db atm was fine. card in, 440, screen asks if i want deutsche bank conversion. for 440 euro they would charge me 496.23 usd. i pass, press eur and get 440 euro out. (everytime, every bank, the conversion they give you if you press usd is more expensive). 2 minutes later i look at my statement in us,489.64.almost 7 dollars saved by pressing euro. then i go on xe. com to see the eur - usd rate. 1.0916 interbank. so in the ideal world i should have paid 480.30 dolars for 440 euros. 489.64-480.30=9.60. the bank got 9.60 dollars, the difference between interbank rate spot and the rate they gave me.

so this was deutsche bank. now the others, different days but same way of calculating. always 440 euro out.

cost in dollars to get 440 euro out.

bankia (first time) 3.43 usd
bbva 7.24 usd
deutsche bank 8.40 usd
bankia second time 11.88
sabadell 12.49
lacaixa 16.76 + 4 euro fixed fee, 21.16 total

santander, evo, popular - i did not use they allow a max of 300 euro per withdrawal.

caixa catalunya got bought by bbva while i was doing this.

i do not understand how bankia chared such different amounts. there was a 10 day lapse between transactions.

la caixa is known to be a shark. they have an atm on every corner, though, and the atms are pretty. by far the most used atm by tourists in bcn....

p. s.
your bank in the us might charge you a fee for using your card in a foreign atm. in my case it is usd 3 and i get the fee refunded if i have a certain balance in my account. that fee has nothing to do with with anything on the spanish side.