Help stop huge rip-off – all Tesco and RBS card holders

premierfella

Thanks OP. I was completely unaware of this and hold a Tesco credit card. I am unlikely to ever be stung by Tesco or RBS/NatWest given I use more competitive cards when abroad, but the issue needs airing as otherwise other issuers might follow the lead. The following from the Guardian strikes at the heart of the issue for me:

"In addition, Tesco has confirmed that its exchange rates are not published, and says the way they are calculated is "business sensitive". The only way you can check them, is by ringing up."

Are they serious? How can publishing daily conversion rates in the same way as Mastercard or Visa be in any way business sensitive? (unless "business sensitive" is code for "would affect our profits as customers could see how uncompetitive our conversion rate is").

fozmcfc

I've Tesco and Natwest cards, I certainly won't be using them when I'm abroad.

Degenerate

premierfella wrote: »

(unless "business sensitive" is code for "would affect our profits as customers could see how uncompetitive our conversion rate is").

I think you hit the nail on the head there.

bigboyeast

Premierfella

the quote in The Guardian was taken directly from a Tesco reply to one of my official complaints.

Basically they stated that they use an exchange rate set by RBS, but won't state how this was set, what market/wholesale rates are used to determine it. They stated that it is not published anywhere. You can only get the rate once the transaction is posted to your account.

The reference in the CC T&Cs to call an 0845 number is useless. If you call the number they only give you an indicative rate , and tell you that the rate you will finally get will only be determined when the transaction is processed.

It is interesting to note that the rate quoted by Tesco over the phone is the RBS published [FONT=&quot]“prevailing rate for the day” [/FONT]for the previous day. This rate is referenced in the T&Cs of RBS debit cards (Ie Personal bank accounts T&Cs)

This can be found at

natwest.com/commercial/international/g3/commercial-exchange-rates

However, unlike MasterCard and Visa the rate used by Tesco/RBS will change during the day. So three transactions during a day will attached three different FX rates.

MasterCard set a single rate for all transactions processed during any one day for one currency pair. This rate is set a 8.00 pm St Louis time and reflects the wholesale market rates of that day. This rate is then used to process all transaction during the next 24 hours.

Hence for the vast majority of transactions (particularly in USA and Europe) that take place on a day T they will be processed on the day T+1. The rate used will have been set at the end of day T and reflect the rate of the day the transaction took place.

With Tesco and RBS the rate will be that on day T+1 when the transaction is passed to them by MasterCard. From my analysis so far RBS start the day with approximately 2.45% additional margin built into their rates for the Euro, and 2% for the US$.

As the MasterCard FX rate is fixed for any particular processing/settlement day, but the RBS rate fluctuates with the FX wholesale market, the actual percentage margin (over the MasterCard cross-rate) will vary dynamically. This movement can have both a positive and negative effect on the margin. On days when the pound goes up against the currency in question, the RBS/Tesco margin will fall. For days when the pound fall against the currency in question their margin will increase.

However it is very rare that the exchange rates will move by more than 2% in a day. Hence you will nearly always be worse off with Tesco or RBS.

Now comes the clever bit

Both Tesco and RBS have left themselves the option in their T&Cs to use either there own rate or the MasterCard rate. Remember that they must pay the merchant back at a value set using the MasterCard rate. If the market moves against them to such an extent they could end up negative on the rip-off. So they have left themselves the option to switch to the MasterCard rate in this situation and just make their published 2.75% margin.

Some banker spent a lot of time making sure they always win.

premierfella

bigboyeast wrote: »

With Tesco and RBS the rate will be that on day T+1 when the transaction is passed to them by MasterCard. From my analysis so far RBS start the day with approximately 2.45% additional margin built into their rates for the Euro, and 2% for the US$.

Thanks for the detail.

I understand the point about them being (potentially) able to cherry pick the best option (RBS "dynamic" rate or usual Mastercard rate).

The dynamic nature of the rate on T+1 rather than T, which I understand you advise is the norm for Visa and Mastercard, I also understand.

The estimated "loading" or additional margin on the RBS rate I'm not sure about. Lets assume for simplicity's sake that the near impossible happens and the Euro rate remains static for 24 hours from the Mastercard/Visa fix time. You are saying that the RBS rate vs Mastercard/Visa would still be (based on your estimates thus far)around 2.45% worse than the Mastercard/Visa rate. But Tesco and RBS/NatWest customer transactions would still suffer the additional 2.75% foreign transaction fee on top of this!

I accept that the rate could move +/- in normal circumstances during the day (narrowing or widening the rate differential against the Mastercard and Visa rates) but that of course would tend to average out at near balance over the long term.

That makes a mockery of the summary box information for the cards doesn't it! (the summary box supposedly allowing comparisons between cards to be done, but the whole point of it undermined in this case for foreign transactions as the comparison is misleading against "standard" cards using the Mastercard or Visa rate).

Additional: I still fail to see how Tesco or RBS/NatWest could argue the "business sensitive" case - if their rate is linked to a standard "dynamic" RBS rate there is nothing "business sensitive" about saying so (other than them formally making public a profitable loophole which others could just as easily exploit but either choose not to, haven't been clever enough to notice or don't have the systems to copy quickly).

bigboyeast

premierfella

yes it does

Example

when I went to France and used my Tesco card the margin on three transactions during one day was around 5% (2.25% + 2.75%).

When ChattyChappy did a test a couple of weeks later his difference was 4.8% over MasterCard (USD)

I have also tracked the RBS prevailing rate of the day (which changes daily so I always print off for evidence) and the MasterCard rate (which can be checked for upto 6 months) for the following currencies over the last 5 months.

Average Margin at the start on a day

[FONT=&quot]2.45% for the Euro
1.97% for USD
2.77% for the AUD
2.29% for the ZAR
1.94% for the Turkish LIRA[/FONT]

and this fits in with the 9 examples I have received from people who have also spotted the scam

If as with most people (including Martin Lewis ) you only compare the loading as stated in the cards summary boxes you would place these example cards in this order Best to worst:-

Santander Zero 0 % above MC/Visa
Halifax Clarity 0 % above MC/Visa

Tesco 2.75% above MC/Visa
RBS 2.75% above MC/Visa

Lloyds 2.95% above MC/Visa
HSBC 2.95% above MC/Visa

MBNA 2.99% above MC/Visa

However, the practice Tesco/RBS follows allows them to advertise 2.75% whilst actually charging nearer 5% by building the extra margin into the exchange rate. I believe they choose a dynamic rate rather than setting a daily rate like MasterCard/Visa to make it harder for cardholders to work out what is going on.

dzug1

bigboyeast wrote: »

If as with most people (including Martin Lewis ) you only compare the loading as stated in the cards summary boxes .

Actually Martin has changed the Cheap Travel Money guide - probably very recently

[Deleted User]

Sorry I have little indeed no sympathy,if you are going to use a cc abroad then you research the best one to use,if you dont do that then you obviously pay the price.End of story or should I say non-story really

stephane_2

woodbine wrote: »

Sorry I have little indeed no sympathy,if you are going to use a cc abroad then you research the best one to use,if you dont do that then you obviously pay the price.End of story or should I say non-story really

I totally agree.....a non-story

chattychappy

woodbine wrote: »

Sorry I have little indeed no sympathy,if you are going to use a cc abroad then you research the best one to use,if you dont do that then you obviously pay the price.End of story or should I say non-story really

Yeah, you research the best one to use based on what you are told. Then find out that you were misled.

Would you be happy if you compared APRs, selected a lower APR, only to discover later that the CC had adopted it's own calculation method so you were in fact paying more?