Credit Card Scam?

[Big Boy]

I had a bill of 45,454 Baht to pay yesterday. Not being in the habit of carrying that much cash with me, I presented my UK Credit Card. I was then asked if I would like to pay the bill in Sterling - £941. Using a conversion rate of 50 Baht/Pound, I reckon the converted cost would be £909. This is a differential of £32 (1,600 Baht).

I don't expect use of my card to cost anything like that, so is this a scam, or is there a logical explanation?

[Edit] I chose to pay in Baht.

[Majestic Creek]

This is a regular option that all countries use when you present your card abroad. They seem to think that you will opt for payment in stirling, as you will feel more comfortable knowing what you are being charged. Where as, in fact, it is always better to pay in the local currency and let your UK bank do the conversion, as it will always be better than the rate being offerd.

Nationwide, my UK bank sent a bulletin out on their web site confirming that.

I paid with my UK card at Pure Plaza for a t.v. set, about 7000 bht and when I put my pin numbers in, saw a message on the screen asking if I wanted to pay in bht or stirling. The shop assistant didn't bring this to my attention and it would have gone through in bht if I didn't notice it !!

Not as big a difference as your bill, but it was still quite a lot for such a small purchase, around 20 GBP.

[Frank Hovis]

This is a relatively new service both Visa and Mastercard provide, it's called CPC (Cardholder Preferred Currency) or DCT (Dynamic Currency Transaction) where the cardholder has the option to pay in local currency or 'home' currency.

There is a charge for paying in the non-local currency of about 3%, but the transaction provider (Visa/MC) are supposed to use current Interbank mid-rates, whereas your bank can levy it's own charge and it's own rate of FX if you pay in local currency.

In general, on a USD/JPY/EUR/GBP 'home' account you are better to pay in the local currency, but it does depend on what kind of foreign transaction fees your bank/card supplier applies.

Is it a scam? Well, in my non-professional opinion Yes and No. Yes because you pay 3% to pay in your 'home' currency and No because the price you see is the price you pay, it's not hidden from you.
If you are a tourist who isn't very good at arithmetic then perhaps you feel more comfortable paying 20GBP for a meal rather than a mystery amount of 1000THB and accepting that the extra 60 pence is for piece of mind when you go back to check your statement.

Paying in Baht was almost certainly the cheaper thing to do, especially for larger sums where the 3% can amount to a useful sum of money.

[HHTel]

When choosing whether to pay in Thai baht or sterling against a UK bank, you have to factor in that if paid in baht, the bank in the UK will probably charge you 3% non sterling transaction fee.

This fee is quite new but I've heard that many banks are charging this now.

Edit: You beat me to it, Frank!

[Big Boy]

Thanks guys - I don't use my card very often, and this was the first time I'd encountered it. So I guess its a kind of legalised scam. When it appears on my statement, I'll report how much I was actually charged.

[Pleng]

This is a relatively new service both Visa and Mastercard provide, it's called CPC (Cardholder Preferred Currency) or DCT (Dynamic Currency Transaction) where the cardholder has the option to pay in local currency or 'home' currency.

I wasn't aware Visa and Mastercard provided such a service. But how do you know if you're getting the 'official' service or not? Retailers can charge in any currency they like and make up their own exchange rates.

Also be careful, some ATMs will offer to do the conversion for you. This can actually be quite useful if you're only getting out a small amount as it will save you the foreign transaction fee if your bank charges one, but you'll always loose out on the exchange rate.

[Frank Hovis]

Visa have an online FXT calculator here http://www.visaeurope.com/en/cardholder ... rates.aspx (for GBP/EUR).

If you know the transaction charges your bank applies you can compare what the CPC value is with what you will be charged if you pay locally. It works in an iPhone type browser so you can compare at the checkout.
As HHTel says, some banks have quite large FXT charges, others have much smaller ones or none at all.

[Pleng]

OK so it's an online service. That makes more sense. I wouldn't expect any of the retail outlets to be using an official system.

I remember buying something once and it they automatically converted to sterling without even asking me. I didn't realise until I studies the receipt two days later and I was pretty p***d off about it. So just be careful!

[HHTel]

I don't think the exchange rate offered can be affected locally but you should be given the choice.

Incidentally, this doesn't just apply to credit cards. It applies to UK ATM cards also.

[Pleng]

I don't think the exchange rate offered can be affected locally but you should be given the choice.

If they are doing the conversion for you (ie billing you in your native currency) they can make up whatever exchange rate they like.

[Big Boy]

I don't think the exchange rate offered can be affected locally but you should be given the choice.

If they are doing the conversion for you (ie billing you in your native currency) they can make up whatever exchange rate they like.

I'm fairly sure that the £941 was offered via the Credit Card function in the form of a print out, so it couldn't have been tampered with locally, although a doctored printed offer would be easy to replicate.

[Frank Hovis]

Pleng, I think you may have misunderstood the CPC process.
The option to pay in a different currency is provided by Visa/MC not the merchant.

You are right in saying if you ask to pay a bill here in GBP, then the vendor could say that your 1000THB bill will need to be charged at, say, 25GBP, but they will send that through the Visa system as a GBP transaction, effectively making up their own FX rate and you should get a receipt for 25GBP.

As CPC is a conversion during the transaction, the merchant does not get the opportunity to alter the FX rate for the transaction, the local amount is entered by the merchant and the 'home' amount is calculated by the credit provider and presented to the merchant and yourself for you to choose local or 'home'.

The receipt, if you opt for 'home' currency, should show the local amount, the FX rate and the 'home' amount, it is the 'home' amount that will be debited from your account. The charge for this (about 3%) is included in the FX rate so your never actually see the extra amount printed.
There is provision in UK law to dispute a CPC transaction over a certain limit of loss, if you find that you have been CPC'd without you, the cardholder, making the choice, e.g. In the event the merchant chooses a CPC transaction for you, which they might because some transactions get promoted by the credit provider to the merchant with cheaper charges. The limit used to be 12GBP (of loss, not the transaction value).

[Big Boy]

The transaction has appeared on my statement today i.e.:

Straight conversion - £909.41
Non-Sterling transaction £25.01
Total cost: £934.42

So the pay in Sterling option would have cost me £6.58

[Big Boy]

Thinking about the above, the lesson learnt is don't use the credit card unless absolutely necessary - I guess I could have saved myself £25 if I'd paid with my Thai Debit Card, or made 5 transactions at the ATM.

£25 does seem very harsh for a single transaction.