Foreign spend conversion rate date

jrourke

Hi,
Can anyone confirm if the rate used when making a purchase on a credit card in a foreign currency is the rate at that exact time of transaction or the rate when it clears which I've seen take over 72hours in some instances?
Thanks in advance.

lee111s

On my clarity card it seems to be immediate.

When I was on holidya last month, I withdrew some cash and moments later logged on to me internet banking to pay it off ensuring no interest was charged. The available balance had been reduced straight away following the ATM transaction. I was then able to work out what rate I'd got by dividing the amount of Euro's I'd withdrawn by the amount I was charged in sterling.

eDicky

jrourke wrote: »

Can anyone confirm if the rate used when making a purchase on a credit card in a foreign currency is the rate at that exact time of transaction or the rate when it clears which I've seen take over 72hours in some instances?

If the purchase transaction is made in the foreign currency the conversion is done by the card company, e.g. MasterCard, on the date the transaction is processed by MasterCard (or 'date of settlement'), at the MasterCard rate on that day. It is usually not the same day that the purchase is made, but a day or so after.

However, if the merchant is allowed to process the transaction in the cardholder's currency (in our case GBP), instead of the local currency, then the conversion is made at that time, using a rate favourable to the merchant and not to the cardholder. This is known as Dynamic Currency Conversion, or DCC, and it's immediate process is often used as an excuse by a merchant to 'recommend' allowing them to make the exchange before the rate can vary. Don't be fooled! Unless there is a dramatic and unusual rate drop by the following day you will always lose, so make sure that the transaction is made in the foreign currency.

grumbler

jrourke wrote: »

Can anyone confirm if the rate used when making a purchase on a credit card in a foreign currency is the rate at that exact time of transaction or the rate when it clears which I've seen take over 72hours in some instances?

I guess it clears when it is processed. However, merchants don't have to process transactions instantly and theoretically have up to 6 months to do this.

bengal-stripe

I have discovered a discrepancy in the ear-marked amount and the final charge (usually no more than a few pence either way).

I would say, the rate on the day of purchase is used to calculate the amount to be put aside, but the actual rate used for the booking, is the one on the processing day.

grumbler

IIRC, the rate can be different even for the same day transactions.

SuperHan

Clarity seems to take the money immediately from the available balance, but it can take a few days to appear on the statement. For me, it's usually a few pence of a few pound different, but the change in available balance is enough to give an indicator of the rate.

jrourke

Quite interesting then as there is an element of risk, albeit quite small, in that you make a large purchase and the next day the pound crashes you could land up paying a lot more than you orignally anticipated.

bengal-stripe

jrourke wrote: »

......you make a large purchase and the next day the pound crashes you could land up paying a lot more than you orignally anticipated.

But equally, it could go the other way and the Euro or the Dollar crash; which means you will be paying a lot less in pound.

YorkshireBoy

bengal-stripe wrote: »

I have discovered a discrepancy in the ear-marked amount and the final charge (usually no more than a few pence either way).

I would say, the rate on the day of purchase is used to calculate the amount to be put aside, but the actual rate used for the booking, is the one on the processing day.

I concur with this. It's certainly been my experience over the years...most recently just last month with Santander Zero, Nationwide Select, and Metro Debit.

chattychappy

YorkshireBoy wrote: »

I concur with this. It's certainly been my experience over the years...most recently just last month with Santander Zero, Nationwide Select, and Metro Debit.

Yep mine too.