FTF fee, how does this work

Anonymous · ‎10-30-2022

Banc of California Max Preferred;

2% of each foreign purchase transaction or foreign ATM advance transaction in U.S. Dollars
3% of each foreign purchase transaction or foreign ATM advance transaction in a Foreign Currency

I thought one should pay with foreign currency at foreign places, declining the merchants's requests to pay with U.S. dollar? That's at least what I've learned browsing sites. But what's the use in this case. Which way should one pay?

Anonymalous · ‎10-30-2022

What you really want to avoid is dynamic currency conversion (or cardholder preferred currency). This is where the merchant offers to convert a purchase into your own currency, which they do at the exchange rate most advantageous to them, and then add a markup. This can sound appealing, because you know what you're paying in your own currency immediately, but in practice this amounts to is a hidden fee, which can reach the double digits. That's why you always want to pay in the local currency, so your credit card network (VISA, MC, Amex, etc.) is the one who chooses the conversion rate. You'll get charged about 1% for the service (on top of the FTF), and you'll have to wait for the charges to post to know what you actually paid in your own currency, but they're not incentivized to gouge you.

Anonymous · ‎10-31-2022

@Anonymalous wrote:
What you really want to avoid is dynamic currency conversion (or cardholder preferred currency). This is where the merchant offers to convert a purchase into your own currency, which they do at the exchange rate most advantageous to them, and then add a markup. This can sound appealing, because you know what you're paying in your own currency immediately, but in practice this amounts to is a hidden fee, which can reach the double digits. That's why you always want to pay in the local currency, so your credit card network (VISA, MC, Amex, etc.) is the one who chooses the conversion rate. You'll get charged about 1% for the service (on top of the FTF), and you'll have to wait for the charges to post to know what you actually paid in your own currency, but they're not incentivized to gouge you.

Right, so the 1% "advantage" in FTF from paying in US $ is usually going to be well exceeded by an unfavourable DCC exchange rate (which can be basically made up!)

As an example, suppose I buy something for 100 pounds. If the standard rate is say 1 pound = $1.10 the purchase becomes $110, + $3.30 FTF for a total of $113.30 With DCC, I decide 1 pound = $1.30 ("for your convenience") The purchase is now $130 + $2.60 for the "cheap" FTF for a total of $132.60