Capital One- Poor Exchange Rate

[Lancelot]

Don't know if this has been covered before but FYI.

Today I went to the Aeon ATM at South Pattaya Homeworks. I used my Vanguard (VISA) card to withdraw 14,000 baht and used my ING (Mastercard) card (Ing has been bought by Capital One) to with draw 10,000 baht.

Got back to my room and there was a withdrawl ATM notice from Cap One (fast!) in my mailbox. I checked the rate B29.579672, then compared it with Visa, whos was offering B29.792939! Links below:

http://corporate.visa.com/pd/consumer_services/consumer_ex_results.jsp

https://www.mastercard.com/global/currencyconversion/index.html (For some reason MC was quoted for Feb 21. Visa was uptodate, Feb 22)

Any other posters noticed the poor Capital One rate? In USD terms I paid a premium of $2.42 to use the Mastercard network..

Its going to be Visa for me.

I did send Capital One an email asking for a refund. Yeah, I know good luck with that but its the principle!

Chok dee krab!

[Pib]

My experience with Visa and Mastercard-based credit/debit cards the Mastercard exchange rate is usually lower just like you experienced. Assuming the bank which issued the card is not applying an foreign transaction fee(s), which Cap1 don't as far as I know, then just the fact the card is a Mastercard its exchange rate will usually be lower than a Visa-based card....don't matter what bank issued the Mastercard. So, since the ING/Cap1 card is a Mastercard you are getting the lower rate in comparison to the Vanguard Visa card.

Edited February 22, 2013 by Pib

[Lancelot]

My experience with Visa and Mastercard-based credit/debit cards the Mastercard exchange rate is usually lower just like you experienced. Assuming the bank which issued the card is not applying an foreign transaction fee(s), which Cap1 don't as far as I know, then just the fact the card is a Mastercard its exchange rate will usually be lower than a Visa-based card....don't matter what bank issued the Mastercard. So, since the ING/Cap1 card is a Mastercard you are getting the lower rate in comparison to the Vanguard Visa card.

Thanks for taking the time to share your thoughts Pib

I've checked the Capital One website and they say they don't charge a foreign currency fee, so it must be a Mastercard thing.

I usually use my Schwab card and the rate I receive is always the same as the Visa exchange rate. It takes several days for my Vanguard card transactions to post so I don't know if I received the full Visa rate or not but it's usuall very close.

Anyway, its Visa (Schwab) for me

[JimGant]

For some reason MC was quoted for Feb 21. Visa was uptodate, Feb 22)

There have been several threads here for several years reporting that Visa gives a better exchange rate than MC -- on average, 16 satang (for US$ transactions). And, it averages out to 8 satang *above* the buying TT rate for Visa -- and 8 satang *below* the buying TT rate for MC.

And this has been my experience. First, I've used both a Visa and a MC at about the same time -- and found that the FX rates I achieved were exactly as shown on the Visa and MC websites advertising the daily rates (as adjusted for the 12-hour gap between Visa and MC, as discussed below). So, without further shopping or ATM action, I could compare Visa and MC rates strictly by observing what was shown on their websites. Yep, about a 16 satang differential.

One glitch is that, Visa is 12 hours ahead of MC in establishing the daily FX rate. And Visa upgrades at 0001 AM New York time. So, if you do an ATM transaction (near real-time) at 1:00 PM in Thailand with your Schwab Visa Debit/ATM card on 22 Feb -- you'll get the advertised Visa rate for 22 Feb. But, a MC ATM transaction at 1:00 PM Thai time will get you 21 Feb MC advertised rate. Depending on which way the FX rate is headed, you'll be better off -- or worse off-- than that average 16 satang spread between Visa and MC.

For a credit transaction -- things aren't near real-time, and thus aren't finalized for about 24 hours. So, a Visa charge at 1:00 PM Thai time will usually receive the next day's published Visa rate. But not for MC, and its 12 hour lag from Visa -- it will normally be the same day's rate. (And, again, this can be good -- or bad -- depending on where FX has headed.)

So, yeah, head to head, a Visa Debit/ATM card and a Visa Credit card are superior to a MC package (assuming the fee structures are identical).

But what about if the cash back features are different? Capital One used to offer a 2% cash back (for some items) with their MC offer. Can't find that offer on-line anymore -- but I can find a Capital One Visa package with a 1.5% cash back (for all items). What would that mean for 300k baht of purchases (assuming 2% for all purchases with the MC option)? Oh, about a $3 advantage for the Visa 1.5% offer.

(Ok, Pib -- settle down. Double check my numbers before sending off your application )

[Lancelot]

I am a Capital One customer by default- I began with the now defunt Net Bank and they were Visa. ING absorbed Net Bank and charged a foreign transaction fee, so I never used that card in Thailand. I noticed that Cap One charged no foreign currency fee, so I decided to test the card. Yeah, I should have read the Visa/MC threads

[Pib]

But what about if the cash back features are different? Capital One used to offer a 2% cash back (for some items) with their MC offer. Can't find that offer on-line anymore -- but I can find a Capital One Visa package with a 1.5% cash back (for all items). What would that mean for 300k baht of purchases (assuming 2% for all purchases with the MC option)? Oh, about a $3 advantage for the Visa 1.5% offer.

(Ok, Pib -- settle down. Double check my numbers before sending off your application )

Jim,

Too late...I mailed in my application last week!!! I can use that card as a backup to by backup to my backup card to my current Cap1 Mastercard credit card.

Naw, I already have one backup no foreign transaction fee credit card (a Visa Pentagon Federal CU card with a small cash back rewards program...not nearly as good as Cap1's) to my particular no foreign transaction fee with cash back Cap1 credit card which I got approx 2 years ago...or was it 1 year ago....time is blur. My Cap1 card is still paying 2% cash back on grocery store and gas station purchases and 1% on everything else. So far it has not changed to 1.25% for all purchases which 55Jay mentioned was apparently going to happen 13 Feb 13 back in December as he had got such a notice in the mail for his particular Cap1 card that was paying 2%/1% cash back....see this Link. I never got such a notice but maybe it got lost in the mail...or maybe it won't start until the end of my current monthly billing cycle...or maybe Cap1 changed their mind...or maybe I just don't know which happens more and more now days. But if it changes to a flat 1.25% that still pretty good...but for my use of the card my current 2%/1% cash rate gives me more cash back especially since apparently the way Lotus/BigC/Foodland/Tops/and other similar Thai stores code their merchant account, I get 2% for anything and everything I buy in those type stores...including my Chang Draught from their liquor store sections.

I do know for sure I'm still getting 2% on my Lotus & Foodland store buys and for PTT deisel fuel feeding my Fortuner. I just checked my Cap1 cash back rewards activity just before posting this and the 4 purchases I have done since 13 Feb (1 Lotus buy, 2 Foodland buys,and 1 PTT fuel buy all earned 2% cash back. And in my terms and conditions area in my online account under the cash back area it states:

How do I earn rewards?

You will earn 2% cash back on all net purchases (purchases minus any credits or returns) at major grocery stores and gas stations and 1% cash back on your other net purchases only. Please note: Merchants do not always identify or bill transactions by the correct merchant category code which could impact the amount of cash back you earn. Capital One is not responsible for merchant category code errors by merchants. Checks used to access your account will not earn rewards.

Yea, the exchange rate I get with my Cap1 Mastercard credit card is not quite as good as a Visa-logo'ed credit/debit card, but Cap1's cash back reward program on my card more than makes up for that.

Cheers,

Pib

[puck2]

This thread has now 2 complexes

- different exchange rates

- cash back

Both of them and some other aspects - like terms/fees of the card issuing banks - are the critical points for the best results. I refer
now only to the exchange rates.

Some excerpts from MC and VISA;

Marked extra bold in blue - is the main reason for different rates between MC and VISA described so excelently in post #4 by JimGant

MC:

MasterCard uses multiple market sources (such as Bloomberg, Reuters, Central Banks and others) to develop exchange rates. These rates generally reflect either wholesale market rates or government mandated rates that are collected during the daily rate setting process. The displayed rates are derived from the buy and sell rates included in the MasterCard daily rate setting process and do not include any charges or markups applied by the Issuer. Please note that due to possible rounding differences, the displayed rates may not precisely reflect the actual rate applied to the transaction amount when converting to the cardholder billing amount. The exchange rate that is applied to a transaction is the exchange rate as of the day of settlement which is the day that MasterCard determines the settlement amount to be exchanged between the acquirer and the issuer. The settlement date is therefore typically different from the date of the actual transaction.
MasterCard does not provide the exchange rate when purchases are converted from the local currency by the merchant to the cardholder's currency at the point of sale.

VISA:

Will the rates shown be the rates charged to my account?

The exact rate you receive depends on when the transaction is posted to the Visa system. The day the charge actually posts may be later than the day on which you made the purchase, depending on how promptly each merchant handles their Visa transactions.

How does Visa calculate its rate? Every day—except weekends, Memorial Day, Christmas Day and New Year's Day—Visa calculates the rate for the next day's transactions. The Visa rate is selected from a range of rates available in wholesale currency markets or the government-mandated rate in effect one *) day prior to the applicable central processing date. Visa makes this rate available to issuing banks, which may adjust the rate when billing cardholders by applyinga foreign transaction fee. The rate Visa makes available to issuingbanks may vary from the rate Visa itself receives.

*) add:
working

[JimGant]

The rate Visa makes available to issuing banks may vary from the rate Visa itself receives.

But of course. Visa and MC are so large, they realize at least the Interbank Exchange Rate -- and maybe slightly better. For Feb 22nd, the IER (according to the Bank of Thailand) was 29.83 baht to the US dollar (the buying TT rate was 29.69).

Visa transactions that settled on Feb 22 had a 29.79 rate -- and MC for Feb 22 settlements had a 29.59 rate. So you the consumer, who just spent 100,000 baht on a home theater system, end up paying $3,380 with your fee free MC -- or $3,357 with your fee free Visa. But MC (or Visa) only need to send $3,352 to Thailand to cover the 100k baht purchase (less interchange fees). Both MC and Visa are realizing a spread profit -- but MC is certainly the greedier. (And the issuing bank is probably realizing some of this spread profit.)

And, if your card is not fee free, MC will cost you more in percentage fees -- since 3% of $3,380 is more than 3% of $3,357.

Nice work -- from the inside, anyway.....

[Pib]

And a statement taken from above Mastercard paragraph: "MasterCard does not provide the exchange rate when purchases are converted from the local currency by the merchant to the cardholder's currency at the point of sale". Note: although I didn't see a similar statement in the Visa paragraph they do they same thing as Mastercard.

Or said another way, the bad, bad Dynamic Currency Conversion (DCC) where you get the rate provided by the merchant (or at the ATM) which is probably going to be around 3% lower than the card exchange rate. And what makes it doubly bad is "if your card has a foreign transaction fee say of 3% you will still most likely get charged that fee also since the fee is usually/really charged just because it's a foreign transaction in whatever currency....see, your card issuing bank still gets its cut even through they really didn't have to do any currency conversion...they just logged a foreign transaction. Wow, you just got charged around 6% total using a DCC transaction with a card that has a foreign transaction fee also.

In closing, where I said "bad, bad" above...well, it's only bad, bad for the customers....it's "good, good" fee- & profit-wise for the merchant, local bank processing the point of sale transaction for the merchant, and card issuing bank.

[JimGant]

Interestingly, SCB publishes DCC rates for credit cards -- so you can actually see the "ream" factor:

http://www.scb.co.th/scb_api/dccb_25.jsp

For 22 Feb, you would do worse than 4% over the TT rate (about 4.5% for a Visa card, which averages about 8 satang over the TT rate).

And, if you're getting a cash-back on the purchase -- this means your cash-back cost to the issuer is over 4% more than if DCC hadn't occurred.

Hmmmm. I bet this is recouped via the interchange fees charged the merchant, i.e., higher fees for DCC transactions. I know ATM owners that charge "access fees" -- like the 150 baht -- receive a smaller reimbursement (reverse interchange) from the issuing bank. (However, this is something like $.30 vice the normal $.40 per transaction -- hardly a game changer against 150 baht.)

[Pib]

DCC bad, very bad for the customer but very good for the merchant & bank. But people continue to press Yes on the ATM accepting a DCC rate (after their eyes blur over from trying to understand the vague/misleading language on the ATM screen) or sign the point of sale receipt for a DCC transaction. It's too bad so many people just don't understand what is going on...but the merchants/banks definitely know what is going on. But hey, maybe there is a silver-lining to this story in that those people who accept DCC transactions are helping the economy by increasing the profits of merchants & banks.

[55Jay]

DCC bad, very bad for the customer but very good for the merchant & bank. But people continue to press Yes on the ATM accepting a DCC rate (after their eyes blur over from trying to understand the vague/misleading language on the ATM screen) or sign the point of sale receipt for a DCC transaction. It's too bad so many people just don't understand what is going on...but the merchants/banks definitely know what is going on. But hey, maybe there is a silver-lining to this story in that those people who accept DCC transactions are helping the economy by increasing the profits of merchants & banks.

Edited February 27, 2013 by 55Jay