Travel credit cards

The article in March 2023 highlighting fees charged for overseas transactions missed the point that the real issue affecting the cost of overseas transactions is not the fee but the exchange rate applied. I use a Wise debit (not credit) card. If I changed $A1000 into USD today on Wise, I would get $US654.30 (taking into account the Wise fee).
Bendigo Bank would give me $US630.50.
Bankwest $US628.
(I couldnt find the 28 Degrees rate online).
Those are significant differences: $US24-26 - around $A38 in a $A1000 transaction.
Forget the fees and focus on the exchange rates.

On a related topic, many foreign merchants now offer to transact in $A and folk agree on the assumption that there is magically no exchange rate loss. If the merchant is receiving, say, $US and you are paying $A, then there must be a conversion at some unstated exchange rate - and in this system the exchange rate is always bad.

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I don’t follow you. If you buy something in AUD and you pay the agreed dollars. How do you have to pay more than that due to some hidden exchange taking place?

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A reality is that each travel money provider may or may not have the best xrate for any given currency on any given day - they change by the minute. Fees are constants.

One bit of advice that is consistent is that Australian banks seem to offer the worst exchange rates of any, often by a large percent.

An excellent point. Another rort for travellers is when a merchant terminal recognises a foreign card (eg a $USD card used in Australia or an $AUD card used in the US, etc) and offers the card’s home currency in lieu of the local currency for the transaction. This applies to credit/debit, not the multi currency travel cards that have their own often significant pitfalls. Those who accept those offered rates get surety of the transactional charge but also get what is predictably the worst possible xrate by a goodly margin.

Many web sites show current xrate conversion amounts rather than actually pricing in $AUD. It is not always clear but often the $AUD amount comes with a caveat it is not fixed, and other times the pricing is indeed in $AUD so the international seller is taking an xrate risk.

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US merchants price their goods/services in $US. In order for you to be quoted a price in $A there has to be a conversion. Invariably that conversion will have been made at a worse rate than you will get using a credit/debit card with a better exchange rate. There’s no additional conversion to be made after you have the $A price - but that’s because the conversion has already been made and invariably at an unfavourable (and probably undisclosed) rate.

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Assuming that this is true (I don’t know I have to take your word for it) it also requires you to be able to find the goods or service that you want elsewhere so that the total you pay is less.

I think we’re getting away from the topic which was travel cards - the ones you use while travelling overseas. Shopping overseas online is something else

Choice has provided two guides recently.
Travel ‘money’ Cards which are a special product.

And on using your Aussie issued Credit/Debit Card while travelling OS.

Note payment for on line shopping is an option with either.
CBA Travel ‘money’ Cards use VISA. It’s not surprising the cards can be used for online purchases. There are no restrictions other than the merchant accepting VISA.

Whether one would want to use a Travel money Card for online shopping with overseas suppliers, there are alternatives, it is an option? It’s a slightly different discussion of the use of the cards, but similar to using them OS to make any purchase at a store counter.

Yes i agree with freddo that you really need to compare the exchange rate that will be provided as well to get an accurate comparison between travel cards and between travel card and using a bank issued card. The rates are all over the place and invariably a travel card has a worse one (not always granted) than the rate you get from VISA in an overseas transaction conversion. You need to dig around a bit to find these rates. We used to use a travel card but over time using my VISA debit card overseas has become a better option when comparing fees and exchange rates given. Another option for large payments overseas (payment for accommodation in advance, for example) is a reputable money transfer service to pay straight into the accommodation provider’s bank account at a very good rate with low fees.

Exchange rates do change on a daily basis but that’s not a reason to ignore rates and focus on fees. There are some cards that consistently offer much better rates than others. I set out the results of my comparison in my original post. Do the exercise for yourself. I am confident that the Wise debit card will still offer much better exchange rates.

We’ve updated our article on travel credit cards, see the new results here:

If you’re planning some travel, don’t forget to consider this alongside travel money cards and debit cards.

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I have compared exchange rates on your first 2 credit cards with the rate using a Wise debit card. To spend $US1000 today would cost

Bankwest $A1595
Bendigo Bank $A1584

Using a Wise card $A1522

I have made similar comments in the past and I guess I should just give up because you just seem to miss the point and continue to provide poor advice. It’s not about the fees, it’s about the exchange rate

Would you explain how you did that so we can understand your methodology? Visas, Mastercards, and others normally use their ‘rate of the day’ for currency conversions so all Visas should be the same within noise, all Mastercards should be the same within noise and so on. Do any use the spot rate of the moment?

Since you quoted an $11 difference between two Mastercards I am curious, not challenging. I also note the Wise is a prepaid debit not a post paid credit card, so is not exactly comparable.

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Hey @freddo, thanks for raising the issue about exchange rates. By posting to this thread, it wasn’t my intent to stir up your original complaint, my apologies if that is how it appeared. When posting here I was simply adding the update to an existing discussion, which I think is a worthwhile one.

I spoke to our finance expert about foreign exchange rates, because in your example it does show a significant difference and we want to make sure that we are providing the best possible advice that hopefully saves people some time and money. What I confirmed is that typically a bank’s foreign exchange calculator (for example, Bankwest) is applied to different transactions and not to transactions made on the travel credit card. Using the Bankwest example again, this is evidenced in point 20 of their product disclosure PDF where it stipulates that foreign transactions on the travel card use the Mastercard rate (and we also confirm this with them direct).

@PhilT has it right, most travel credit cards typically use either Visa or Mastercard’s rate (and there’s not much difference between the two). Using your example of $1000 USD today and putting it into the Mastercard calculator, the cost is $1525, comparable to the rate offered by Wise. In late 2022, we ran an exchange rate comparison across travel cards using real world data based on a $3000 spend amount, so we could put this factor to the test away from the bank’s own calculators and PDFs, and this also confirmed the applicable rates and told us that the cost differences due to the exchange rate being applied were negligible. We’ll be looking to run this test again in the future.

This doesn’t address all the issues with travel credit cards. As I mentioned above, people should consider the different types of travel money products alongside one another because each type has pros and cons, and understanding them can help tailor the right product to the individual situation. There may also be a good argument for taking more than one type of travel money product on a trip. Anyway, there’s a lot here for people to discuss if they wish, and it’s always welcome to hear what worked and in what scenario.

Sincerely, thanks for not giving up and leaving feedback @freddo - it’s been interesting to delve deeper into this aspect of travel cards and explore it here in the Community.

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Hi

I agree that the difference between the Mastercard rate and the Wish rate is insignificant. So if the banks are applying the Mastercard rate, then there is no significant saving in using a Wise card for purchases overseas (though it is much better for transferring funds to a foreign account and for cash withdrawals). My view resulted from my googling the Bendigo and Bankwest Mastercard exchange rates - that takes one to a calculator which doesn’t use the Mastercard rate but less advantageous rates which the banks presumably apply to fund transfers rather than Mastercard purchases. Confusing, but if they in fact apply the Mastercard rate - and you have confirmed that - then I withdraw my earlier comments about exchange rate differences

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The credit card systems are somewhat ‘above’ our banks. Our banks are among the most profitable in the world for a reason.

Issuing the branded cards requires the banks to agree to use their respective conversion rates, not their own, unless a consumer accepts what is a con.

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I am replying to your post only now because I started to look for a travel card or similar.

The article you referred to, “Low-fee travel debit cards”, I believe may inadvertently mislead readers. Mention is made (presumably as an alternative to Big 4 Banks debit cards) of “Foreign currency accounts” and cites HSBC.
Please note (1) Foreign currency accounts are offered by HSBC but they do not come with a debit card and last I heard, one cannot at will withdraw foreign currency from the FCA; (2) the writer correctly names the “EveryDay Global” account, but this is a debit card issued when one opens an AUD a/c with HSBC. The a/c offers the opportunity to exchange AUD for a range of foreign currencies and hold them in a sub-account for use when overseas. But this is not a FX account; and (3) the rate of exchange offered by HSBC (to allow for conversion from AUD to another currency is as great as the FX rates of the Big 4 Banks; (4) I have not investigated if one can wire FX into the Everyday a/c. If so, then that’s a good thing; and (5) HSBC like all other issuers (to my knowledge other than Aust Post and Wise) offer the same basked to currencies.

Some of the posts on CC about travel card IMHO focus on the real issue: the wide range of exchange rates offered by institutions, which often are more deleterious than the fees charged.
May I suggest the writer does a comprehensive comparison of several cards (virtual and physical); Big 4, smaller banks, Wise, Revolut etc,

Say for a person wanting to exchange AUD 2,000 into EUR and AUD 1,000 into AED. Not an unreasonable request given may travel to the EU via the UAE.

Ideally the comparison will include consideration of the exchange rates offered, fees charged and a clarification of fees that are hard to understand (as in my reading of the PDS of St George and Revolut reveals “administrative fee” in the former and a range for 1.5% to 2.5% in fees of the latter).

I will pass this post as feedback, as recommended at the foot of the article.

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