Purchasing in Australia yet incurring a foreign transaction fee

Money
, , ,
22

I wonder if this is a Freudian slip…or reality?

However, as the currency conversion appears to be GBP, Northern Ireland (British pound or GBP) makes sense and not Sweden (Krona)

At least they have admitted that the monthly fee has been processed in a foreign bank with potentially a foreign currency.

As the price is advertised in AUD and Spotify blames your bank for the foreign exchange charges, this is not good enough. They should be at a minimum be disclosing on their website that payments may incur a foreign exchange fees as the base currency charged is GBP at a monthly rate of $17.99 (or what ever subscription payment is made). Not doing so is misleading and unfair to Spotify customers. Blaming the customers bank is shifting the blame for something in their control. If the amount was charged in AUD in or through Australia, then there shouldn’t be an issue or additional charges.

The charge could have been in GBP but equivalent to the advertised AUD amount based on the exchange rate of tte day. Their records will show AUD equivalents.

Maybe ask them what currency the original charge is in before conversion to AUD…and state you have been charged in GBP at the Australian end.

2 Likes
23

(Spotify is a Swedish company.)

This.

@mcbodee needs to persevere even though at the moment all that is happening is finger pointing / blame shifting.

The sensible thing at this point might be for Spotify to change the advertised rate from $17.99 to $18.52 and forget about it. That should be compliant with the ACL for new customers and it is unlikely that existing customers can claim contractual conditions that would avoid future price rises (but no way can I be bothered looking at Spotify’s Ts&Cs).

1 Like
24

Nothing suggests the charge was done in anything other than $AUD. The evidence shows it was charged in $AUD in ‘GBR’ that includes Northern Ireland. The charge is not currency conversion, it is a slug for an offshore processed account.

Not foreign exchange fees but foreign processing fees.

This is in spite of the ISO codes @person referenced above. ISO 3166-1 alpha-3 is stated as being used for machine readable passports. ISO 4217 is used to designate currency.

Re AUS and GBR, they are standard national designations for Australia and Great Britain. The OP’s statement specified it as a ‘foreign transaction fee’ not a ‘foreign currency fee’.

To wit I looked at my MC statements and each line item designates the country the charge was processed in. AUS = Australia! I do not have anything from Great Britain, but as evidence I did have one from Germany.

image
image817×119 8.61 KB

Note it uses AUD for the currency notation.

nb. A Visa from the same bank shows ‘AU’ on each line item charge rather than ‘AUS’ for country of processing. Edit: Strange a bank should do something like this different ways for different products although AU and AUS are both ‘correct’ 2 and 3 letter abbreviations.

I do not mean to belabour a 3% fee as being this or that, but in this case it seems clearly to be an offshore processing fee rather than a currency conversion fee. The banks have us by the … and will get their fees one way or another.

Merchants should, as @phb noted, be required to include disclaimers about where their processing is done when any fees might be applied in their target markets, minimally to the effect that ‘your bank may apply fees to this transaction even though it is made in your local currency’.

4 Likes
25

Another response from Spotify:

Good question! Spotify is a Swedish company, so international fees might apply when paying for Premium. We double-checked backstage and we can confirm that we charged your PayPal for 17.99 AUD. We’d suggest contacting your bank/PayPal for further info about any transaction fees. Hope this clears things up.

3 Likes
26

So my bank is BankWest that I’m using and I guess they have finally caught up with the times, as all this year and last they have thought the merchant was processing the transaction in AUS when probably was not, but this month have checked and updated to be in GBR. I see in the Spotify community CommBank went through something similar back in 2016 when customers started noticing.

Some interesting notes on the BankWest website - https://www.bankwest.com.au/help/travel-international/international-transaction-fees

When do international transaction fees apply?

We apply an international transaction fee for:

  • All transactions occurring outside Australia (whether effected in a foreign currency or Australian dollars)
  • All transactions in Australia (for example online) where the merchant, or the financial institution or entity processing the transaction, is located overseas.

If you have a personal Bankwest Platinum or World tier credit card you will continue to receive the benefit of having these fees waived.

Transactions in Australian dollars with an overseas connection

In some cases, overseas merchants will allow you to pay in Australian dollars ($AUD). This is still considered an international transaction because your transaction is processed overseas.

Although a merchant might have a ‘.com.au’ website address and displays prices in Australian dollars it doesn’t necessarily mean they are located in Australia or process payments in Australia. It’s best to check with the merchant before you pay if you are unsure.

You can view the merchant location for each transaction, this can be found next to the transaction listing on your monthly credit card statement.

Here are some well known merchants that process some online and telephone card transactions overseas.

Popular merchants that process transaction overseas

Merchant Where they process some payments
Adobe Ireland
Aliexpress UK
Amazon Marketplace UK and Luxembourg
Amoma Hotels France
Ancestry Ireland
Bookdepository UK
Cheapoair UK
Coinbase UK and Luxembourg
Digamma Malta
Edreams Spain
Etsy Ireland
Facebook Ireland
Flyscoot Greece
Godaddy USA
Google UK
IHERB Netherlands
Playstation Network UK
Rentalcars UK
Royal Caribbean USA
Skype UK and Luxembourg
Thai Airways Thailand
Viagogo Event Tickets USA and Switzerland
Vistaprint Netherlands
Wish USA
5 Likes
27

This understates the problem since the payment processing may be done by an entity unrelated to the merchant. (In a sense this is a good thing, since it means that every insecure merchant and his dog is not attempting to provide a secure processing environment for credit card details etc. Leave it to the experts.)

It is quite normal - even for a merchant located in Australia and being a completely legitimate Australian business - to send the processing to another company once you reach the “checkout” stage of a web site. Sometimes that is evident from the random windows that pop up. Sometimes it is not, and is completely back office.

The two examples that have come to light in this topic are at the “bad” end of the scale because they are not located in Australia and are not Australian businesses - but the same problem occurs regardless.

Again understating the problem. You will always be unsure (unless the web site transparently discloses the details up front) but you will very rarely have the opportunity of checking with the merchant before paying (yeah you try to get responsive customer service from a lot of these online operators - pretty sure the shopping cart / transaction will time out before you get your answers).

I come back to my original comment - the authorities need to step in.

5 Likes
28

Even when asking Spotify directly which country does the processing of payments occur, they cannot easily answer:

We’re afraid that we don’t have any info on where payments are processed from or if the location has changed. At this point we suggest reaching out to PayPal for more info. Let us know if you need anything else /DJ

Edited as cannot post within 2hrs as new user :frowning:

Thanks @PhilT. But my issue is with merchant’s not disclosing that they are processing transactions overseas. I have other digital subscriptions that I’ve never paid an international transaction fee such as Netflix, Google, Microsoft, iTunes, Kayo, Optus Sport. Surely it should be made clear to consumers if advertising in Australia on Australian web domains if the transaction processing occurs outside of Australia you may incur an international transaction fee.

ACCC info as well - https://www.accc.gov.au/consumers/health-home-travel/buying-sending-foreign-money

Shopping online

If you regularly make overseas purchases from Australia or travel overseas, you should consider an international transaction fee-free credit or debit card (comparing all the applicable fees and charges).

International transaction fees are usually around 3 per cent of the purchase price. If you do not have an international transaction fee-free credit or debit card, you may avoid these fees when shopping online by:

  • checking if the transaction will be processed overseas
  • asking if your bank is able to block international transactions for particular payment cards.

Note: it may not be clear from the website that an international transaction fee will apply. Even if a website has a ‘.com.au’ domain name or prices in Australian dollars, it does not mean that the business will process the payment in Australia.

Australian consumer law

If you are charged an unexpected international transaction fee for a purchase in Australian dollars from a business that appeared to be located in Australia, it could be considered misleading under the Australian Consumer Law. You should contact your card issuer (for example, your bank) or the international card scheme (for example, Mastercard or Visa) to request a refund.

This is a good article - https://www.choice.com.au/shopping/online-shopping/buying-online/articles/foreign-transaction-fees-when-shopping-online

Interestingly, the fee isn’t charged further afield. Our friends over at Consumer NZ in New Zealand told us none of the major banks – Westpac, ANZ, ASB (owned by CommBank) and BNZ (owned by NAB) – charge the fee.

Also, @PhilT if you message the merchant requesting the country where they process the payment or if outside of Australia and they say they do not have that information. Is that good enough? How will we know. Do we just assume all foreign companies do/could process overseas? Even Australian companies could possibly even do this? Seems all too easy going and left to the banks to decide whether to slug you or not. Do we all look for fee free accounts just in case as any transaction online could be done offshore.

3 Likes
29

For those who wish further information about foreign transaction fees, this website also has some useful information…

https://www.valuepenguin.com/credit-card-foreign-transaction-fees

For one I didn’t realise that it can apply to AUD through international transactions…I have learnt something today/yesterday.

As outlined above, it is correct that they are not responsible for the foreign transaction fee, but they way they do business their customers are subject to such fees using usual/standard/not unexpected payment methods.

Spotify will know this is the case (blind Freddy would now see this) and should be placing a notation on their Australian priced website indicating that additional fees and charges may result from payment of Spotify services as Spotify payment is classed as an international transfer/transaction. They should also suggest that their potential customers contact their own payment organisation to determine if additional fees and charges apply to foreign transactions in AUD or other currencies.

Being clear and upfront would remove any doubt or customer concerns when such fees are paid and also ensure that Spotify does not receive negative customer complaints from non-disclosure of such information.

Maybe you could write again to Spotify suggesting that make such changes to their Australian (and potentially all other country websites) as the existing information is misleading under the Australian Consumer Law in relation to the total cost of the services they provide. It is misleading as they know that their customers may incur fees on the transaction that Spotify makes for its services.

4 Likes
30

These rorting fees are not unique to Australian credit cards / banks. They have become internationally pervasive as the norm. One needs to actively seek out issuers who do not apply those fees to avoid them.

ING is one of our few issuers that can be a pain to start up with, but if you play their game of ‘$1,000 deposit and 5 transactions pcm’ all those fees are waived for the following month, with no hidden fees as with some of the others.

Note retired people need not bother applying with ING, and there are other topics highlighting retirees and cards that is relevant.

4 Likes
31

We use 28 Degrees credit card when travelling for the same reason, but didn’t realise that the foreign transaction fees can apply to what looks like purchasing a product in AUD from a businesses servicing Australia (but chooses to process the service costs outside Australia).

I will be more on guard now and may have to use our 28 Degrees at home from time to time if I know about the potential for additional fees (which incidentally I wouldn’t have known from the Spotify website as they are not disclosed).

3 Likes
32

I fully understood that, although the topic got broader. In one of my earlier responses I had included.

5 Likes
33

Or showing the actual resulting price in AUD? Surely that is better than indicating that there “may” be unspecified “additional fees”?

It can’t be that hard to add 3%. If it turns out that the transaction is not processed overseas, no consumer is going to have a right to complain about being undercharged.

It is clear that Spotify has made business decisions, the consequences of which are that transactions are being processed overseas, and in turn that the actual price is higher than the advertised price.

Scam…

4 Likes
34

It would be perfect if they did this…but they would need to assume that each financial facility charged the same fees…

An easier solution would be to do (or contract out) the account processing in Australia and pass on the fees for this if it costs them to do so…and then advertise the final cost to the consumer.

“an illegal plan for making money, especially one that involves tricking people:”

You might be on the money.

3 Likes
35

excepting it is not always 3% although that is the most common amount. Some still only hit for 2.5% and would any of us be comfortable expecting them not to increase their rort given the chance over time? If there was also a currency conversion that changes by the moment.

While not a bad idea I think it is a step too far in impracticability, if not even possible in a meaningful way.

5 Likes
36

That is a consideration but they have chosen the back end payment processor. I suppose their contract with the processor should include a guarantee about fees - so that they can disclose the total actual price properly.

I wondered about that too. That could be a problem in practice. It doesn’t seem to be a problem in practice right now.

From a consumer perspective though they shouldn’t be able to get away with that. I thought I was dealing with an Australian company (in some cases), I was quoted a price in Australian dollars, I had no idea the transaction would be processed overseas. I expect a fixed price in Australian dollars. If the merchant can’t guarantee that then that is their problem - their problem to absorb any foreign currency variation or include it in their profit margin.

By contrast if I buy in foreign currency from an overseas web site then I expect that there is foreign currency risk and that some of that risk falls on me.

4 Likes
37

Reading the ValuePenguin link above an assuming the information is correct, the foreign transaction fee is composed of two parts. The first is charged by the credit card network, while the other part is imposed by the issuer (e.g. credit card issuing bank).

If this is the case, the additional foreign transaction fees on a Spotify payment is not resulting at the Spotify billing end, but the customer debiting end.

They should be disclosing though.

It is interesting to note that the ACCC website on Payment Surcharges doesn’t cover the above scenario.

It is covered on their buying and sending foreign money website though. This website is also very clear that…

"### Australian consumer law

If you are charged an unexpected international transaction fee for a purchase in Australian dollars from a business that appeared to be located in Australia, it could be considered misleading under the Australian Consumer Law. You should contact your card issuer (for example, your bank) or the international card scheme (for example, Mastercard or Visa) to request a refund."

Spotify should be disclosing this as part of the information on their website as even the ACCC indicates that it is misleading not to do so.

5 Likes
38

That is an interesting transfer of responsibility. While the weasel word is ‘could be’, as I read that paragraph if a merchant did not post a caveat about potential charges, and your bank levied some, it is on your bank to refund them. Is that it? Then the bank would need to go after the merchant, but the xrate fluctuations would reinforce a winner and a loser as those were taken into account.

An allied and regular occurrence is to make a charge in another country. I’ll use my experiences here charging in $AUD using my $USD card as an example.

Purchase $AUD 10.00
Approved at $USD 6.80
Processed at $USD 6.68 (xrate fluctuation between approval and processing)

A week later the item has to be returned for a refund.
Refund amount $AUD 10.00
Processed at $USD 6.67 as the xrate has fluctuated (one could win or lose a bit, but).

One of the ‘convenience rorts’ is when a terminal offers to process your charge in the card’s native currency, so my $AUD 10.00 example might offer to process at $USD 7.05 and if that offer is accepted instead of being billed somewhere around $USD 6.70 it will be guaranteed to be $USD 7.05, the worst xrate possible across the globe at that time, and because it was processed offshore (offshore from the USA) there could be a 3% fee added! Those rorting terminals show their take, but not the card issuers offshore trailing take that is out of their control. (nb my card has none of it except xrate fluctuations. It is as good as it gets for world traveling.)

It can be a mess. If I put myself into the merchant’s shoes and offer at $AUD 10.00 regardless of where I am located, wouldn’t I have done the right thing to process the charge as $AUD 10.00 and those ‘value added value taken’ fees between you and your bank statement are precisely that, not mine? The disclosure should be prominent though!

Seems like the only way to bridle it in would be an international treaty governing all cross border charges, preferably making them not on. Then that ‘lost’ profit would get rolled into the xrates. Now we can begin the topic again with that twist.

4 Likes
39

I don’t think that text has it right - as you suggest.

My position remains: Your arrangement is with the merchant. You agreed to buy goods and services from that merchant at a certain price. All the rest is the merchant’s problem. You don’t have information about or control over how they process the payments in the back end.

The intention of bringing the domestic credit card surcharge out into the open is precisely to make the above true. The surcharge must either be disclosed accurately and in a timely fashion - or absorbed.

I think the intention is that courts interpret the law (in this case the ACL). So it is not up to a web site to say that it is misleading (and a breach of the ACL), only that a reasonable case exists and that it is worth requesting a refund.

I’ve seen this a few times recently with online transactions, processed by PayPal, via a credit card rather than via a PayPal account. So it’s not just payment terminals. (Effectively PayPal is asking you to make a bet with them about exchange rates and they have much more information than you do. In my case that’s OK because these were genuine foreign currency transactions, not bogo-Spotify-PayPal-Australian-British transactions.)

I have a sneaking suspicion that the real problem that started this topic arises with PayPal.

4 Likes
40

Still a little confused with PayPal’s role in this though. As PayPal are doing the payments and incur no fee, so surely the location of Spotify processing the payments is irrelevant and my bank is only dealing with PayPal to process payments?

I’m finding the https://www.paypal.com/au/home/ website links not fully working properly to even navigate their website. Each time I click a link I’m taken to the US site.

3 Likes
41

Me too. That’s why the government needs to step in. You don’t have the power to knock heads together and find out how this works (or doesn’t work, as the case may be). They might.

My guess is that Spotify is not processing any payments - as would also be the case with most online merchants. Instead they pass the transaction to a payment processor (PayPal) to process, utilising the security expertise, IT infrastructure, regulatory compliance, interfaces and arrangements, financial expertise, etc. of the payment processor.

When you pay Spotify, do they give you any payment option that does not go through PayPal?

3 Likes