Citibank FX rate (Citi vs Amex vs 28 Degrees)

[Jack_OC]

Not exactly true... The fee that most consumers get charged (which is usually around 3%) is most often a combination of the Visa/MC charge that the bank incurs, plus a charge the bank adds. Most companies break down the total percentage and you can see the make up of the two components.

What do you base this on? This does not happen with any of the credit cards that I currently have - which includes Mastercards and Visas issued by Westpac, HSBC and Citi. Westpac and HSBC statements just list separate transactions for "FOREIGN TRANSACTION FEE" or "OVERSEAS TRANSACTION CHARGE", without even specifying what transaction it relates to, never mind how it's made up. Citi statements say " includes International Transaction fee AUD xx.xx" next to the relevant transaction, but again they don't say anything about part of the fee coming from Visa. Can you give any examples of card providers who do what you have indicated?

 

[DeKa]

What do you base this on? This does not happen with any of the credit cards that I currently have - which includes Mastercards and Visas issued by Westpac, HSBC and Citi. Westpac and HSBC statements just list separate transactions for "FOREIGN TRANSACTION FEE" or "OVERSEAS TRANSACTION CHARGE", without even specifying what transaction it relates to, never mind how it's made up. Citi statements say " includes International Transaction fee AUD xx.xx" next to the relevant transaction, but again they don't say anything about part of the fee coming from Visa. Can you give any examples of card providers who do what you have indicated?

Citi define it in their fee schedule:
Visa International Transaction Fee3.3% of transaction amount
1.0% is paid to Visa; and 2.3% is paid to Citi (of which, 1.0% is paid to CitiShare or other third parties, when applicable)
Charged for any transaction made in foreign currency.This fee only applies to transactions in foreign countries.

http://www.citibank.com.au/aus/static/feesandcharges.htm

 

[Jack_OC]

Citi define it in their fee schedule:
Visa International Transaction Fee3.3% of transaction amount
1.0% is paid to Visa; and 2.3% is paid to Citi (of which, 1.0% is paid to CitiShare or other third parties, when applicable)
Charged for any transaction made in foreign currency.This fee only applies to transactions in foreign countries.

Fees and Charges - Citibank Australia

OK thanks - sorry I incorrectly assumed the previous comment was talking about statements rather than T&Cs. I see now that Westpac also provide the breakdown on their website (a total of 1% to Visa or Mastercard as applicable). So getting back to the 28 Degrees card - is it true that GE is absorbing a 1% fee from MasterCard on every overseas transaction?? Or do they have a special arrangement with MasterCard? If they're absorbing a 1% fee on every transaction, and not charging any fees of any description of their own, how are they not losing money?

 

[akeno]

A picture that explains why the issuing credit card company will not lose out on any transactions is explained by interchange fees.

File:Gao-report-on-interchange.gif - Wikipedia, the free encyclopedia

 

[Jack_OC]

A picture that explains why the issuing credit card company will not lose out on any transactions is explained by interchange fees.

File:Gao-report-on-interchange.gif - Wikipedia, the free encyclopedia

But interchange fees are different, no? If foreign transaction fees apply, surely that's in addition to normal interchange fees? And presumably the retailer doesn't pay any more than they would if a local card was used? So either the cardholder or the card issuer (or a combination of both) would presumably have to pay a foreign transaction fee levied by MasterCard?

 

[greenfrog86]

But interchange fees are different, no? If foreign transaction fees apply, surely that's in addition to normal interchange fees? And presumably the retailer doesn't pay any more than they would if a local card was used? So either the cardholder or the card issuer (or a combination of both) would presumably have to pay a foreign transaction fee levied by MasterCard?

Interchange fees are indeed different, however akeno is indicating that the net result for GE could be positive...

ie if they receive 2% for the transaction and pay out 1% to MC then they are up 1% in the end, therefore not losing money. Given they have a lower cost service model (no branches for this card, offshore call centre, not open 24hrs etc) they may well be happy having this card earn a smaller profit than other cards in their own portfolio or in contrast to other providers.

You'll also find that the interchange fees depend on many factors, and a foreign issued card does indeed attract a higher interchange fee. I'm not exactly sure how much of this flows on to the issuer, however I imagine they receive a little more... Also, it depends on the type of card used etc etc.

MasterCard Interchange Rates & Fees | MasterCard

Fees and interchange

These are just a couple of examples - one is Visa Europe and one is MC USA but you get the idea.

Other credit card providers are not passing on FX fees so it is a decision that each company makes based on their individual circumstances. I've got platinum QF mastercard from Bankwest and whilst I pay a modest annual fee for this, I get no FX fees but also receive one QF point for each dollar spent. Therefore BWA must see this as a viable economic model for them and personally I think they are going down this path as part of their differentiation strategy.

 

[akeno]

Wow Greenfrog86,

Thanks for explaining this further. I couldn't of said it any better.

Foreign currency commissions is a lucrative market for financial institutions as they will be able to make extra revenue from every transaction. The cost of doing business for every financial institution will be offset by interchange fees which they recoup to offset any losses (such as supplying the 1% back to MC or Visa). There are a few cards out there that do not have foreign currency commissions and this suggests that they are still making a profit from interchange fees. We have NAB Gold Visa debit, Citibank Visa debit, Aussie Platinum Credit Card, Bankwest Platinum Credit Cards and GE Money 28 Degrees...

 

[quokka77]

I think you can add ing direct visa debit for foreign atm withdrawals to that list (but they do charge a % fee for foreign purchases excluding cash withdrawals).

 

[RayEarth2162]

Update: transactions @ 28 Degrees and Citibank Select on 17 June:

28 Degrees: EUR396.49 => A$556.10 (FX 1.40266)
Citibank Select: EUR 389.34 => A$564.04 (FX 1.44871)

Difference: 3.28%

12 June:

28 Degrees: EUR396.49 => A$560.08 (FX 1.41260)
Citibank Select: EUR102.42 => A$149.48 (FX 1.45948)

Difference: 3.32%

19 June:

Citibank Select: EUR396.49 => A$590.78 (FX 1.4900)
Amex Blue: EUR273.85 => A$399.87 (FX 1.46018)

Difference: 2.04%

So...consistently Citibank Select has the worst FX rate, but that is half expected. What is not expected that Amex seem to have pretty good exchange rate in those volatile times.

 

[Jack_OC]

So...consistently Citibank Select has the worst FX rate, but that is half expected. What is not expected that Amex seem to have pretty good exchange rate in those volatile times.

You're including the Citibank 3.3% forex fee in those calculations, right? If so, in the first two examples, the actual fx rates applied by Visa (Citi Select) and MC (28 degrees) are basically identical. That's what I would normally expect, but that did not seem to be the case in the first week of June (for whatever reason).

 

[scheps]

Thats expected with the select as it gives you 5pts/dollar. I haven't had as much good luck as you in the amex department, it was very very similar to my visa/mastercards (non 28 degree) with all fees etc etc taken into consideration.