Sunday, January 15, 2012

International shopping: Are you giving money to the 1%? Be smart & keep 2.6%

Image via Images_of_Money on Flicr
I was buying some parts for the office today from Italy in Euros.  Paypal's default option is to take the money from your paypal balance and charge you their default commission rate of 0.768327 euros per dollar.  The Wall Street Journal's Rate today is .7888 or 2.6% more favorable for me.   Who gets this 2.6% juice?  Paypal.

My business visa  charges a 3% currency conversion fee and they couldn't tell me what the exchange rates are based off of so this wasn't a good option.

My Personal Amex charges a 1% currency conversion fee and I get 1% cash back making that fee a wash.  My personal Amex's exchange rate is based on the numbers published in the Wall Street Journal.  I'm sure there are also cards out there that have 0% international currency conversion fees.

By using the right mix of financial tools I was able to save 2.6% on my international buying.   Ultimately the merchants who take credit cards get screwed with all this stuff, but until something changes and we have some disruptive technology from startups like, hold on to your wallet.


Laura Kaplan said...

Good tips! You can definitely get soaked using the wrong tools. Is the currency conversion fee the same as the foreign transaction fee, or is that something different? My Capital One Master Card charges no foreign transaction fees and gives unlimited 1.5 % cash back, no annual fee. It's the best credit card I've found for traveling outside of the U.S., and my favorite general purpose credit card.

Robert D. Wray said...

@Laura Kaplan - Currency conversion fee is the same thing as a foreign transaction fee in my book. That does sound like a great deal. That's a great tip for the master card. I'll check it out.