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I am curious as to how credit card companies calculate foreign currency exchanges. What rates are used? How are these calculated in the moneyland.ch credit card comparison? Which cards are the cheapest in this regard?
Greetings,
All Swiss credit card issuers charge a foreign transaction fee or administrative charge when you use their credit cards to pay in a foreign currency (a currency other than the one used by your credit card account).
These fees are charged on all foreign currency transactions, whether you use you card to pay abroad, withdraw money abroad, or shop online at foreign merchants.
What many people do not understand is that on top of the foreign transaction fee, they are also charged an additional "hidden" fee in the form of a markup on currency exchange rates. In other words, your credit card uses a currency exchanges which is less favorable than the official interchange rate and the issuer pockets the difference.
Credit card issuers like UBS, Swisscard, Viseca, Cembra Money Bank and others adjust their foreign currency exchange rates on a daily basis. The markup on exchange rates does not appear as a fee in your statements, but your statement does normally show the exchange rate used for a transaction. Rates used vary widely between issuers. Typically, markups equal between 1.5% and 2% of a transaction, but they can come to as much as 3%.
Example: You use a CHF credit card which has a 1.5% foreign transaction fee to make a EUR transaction equal to CHF 500. You pay a foreign transaction fee equal to 1.5% of the transacted amount plus a markup on the exchange rates, in this case CHF 7.5. If the markup equals 2% of the transaction, the total cost of the transaction would equal 3.5% of the transacted amount, or CHF 17.50.
The moneyland.ch credit card comparison incorporates the foreign transaction fees of each credit card into its calculations. The comparison used the CHF-EUR rates published by credit card issuers and is updated at regular intervals.
The comparison is a good first stop to find out which credit card would work best for your specific needs. Choose the "Abroad-only user" profile to find the cards with the most favorable foreign currency costs.
You can find more information about this here:
Swiss credit card comparison
Credit card foreign transaction fees explained
Foreign currency credit cards explained
Best regards from Moneguru.
