9 Nov 2011

Credit Card payments abroad cost me a minimum of 2.0%

I've already had a good moan about being ripped off by the banks for changing money in airports. I've already documented how I was charged 10% for changing euros into sterling and vice versa, and an unbelievable 21.5% for trading euros for egyptian pounds.

OK, so when you go to an exchange booth at an airport, you have to pay something to pay the staff and rent the booth etc. But banks also rip you off for cashing foreign currency cheques, as illustrated by the fact that we were charged 39.32% for cashing a US dollar check, even though the bank took 7 weeks and 4 days to credit our account. No doubt they found something more useful to do with our money during that period than giving it to us.

Everyone tells me to avoid trying to changing cash, or cheques. We should systematically use a credit card to get the best deals, right?

So, what about when I use one of my credit cards to buy things abroad? Well, obviously, if I buy things in any Eurozone country, I only pay the price on the ticket. That is truly fantastic.

But what happens when I'm in the UK or the US? Well, it depends on which card I use. I've looked through the details of my bank statements for 2010-11 and discovered that on my Oney card (which is part of the Banque Accord group), every thing I buy has a 2.1% additional "commission". This is in addition to any potential difference between the rate that the bank gives me for converting pounds or dollars into euros. With my CNRS Corporate Card, provided by BNP Paribas, they are incredibly generous, because the commission is only 1.96% (let's call that 2.0% shall we). Fortunately, I've stopped using my other CNRS "Carte Affaires", also provided by BNP Paribas. When I paid anything with that card, I got charged something like 2.25% but in addition there was a minimum charge which meant that on a purchase of $5, I ended up paying a commission of 0.78 euros, which works out at 17.81%!! I suppose I should be grateful that the CNRS changed the contract for the new and wonderful Corporate card which only uses a flat rate 2.0% charge.

Of course, you shouldn't forget that this 2.0% charge is in addition to the 2-3% that the VISA group will charge the merchant who is providing the services that I am paying for. In other words, we can safely conclude that outside the Eurozone, the banks are taking 5% of your money everytime you make a transaction. And to think that the City of London is up in arms because some people have the gall to suggest that bankers might have to pay 0.1% for making a transaction, up from the current value of 0.0000000.....0%.

But there's worse still. What happens when you draw money out of a cash dispenser? Well, as I am sure you are all aware, when you go to draw out money from a machine abroad, there are often messages saying that you may be charged an extra fee by your bank. So, how big is that fee?

Well, on the 19th April 2011, I drew out £50 from a Barclay's cash dispenser at Stansted airport. On my bank statement I discovered that this cost me €56.57 (based on an exchange rate of 1.1314 euros to the pound). But I was also charged a €4.13 fee - which works out at 7.30%.

Is it any surprise that Barclays makes a huge profit? And is it any surprise that the Markets are doing everything in their power to break up the Euro??

And can there be any better argument for keeping the Euro!

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