Exchange Rate Commissions - What you need to know?

Introduction

If you make purchases from sellers based abroad then you might want to know about minimising the commission the financial organisation (credit issuers, payment processors, banks and so on) receives each time a transaction takes place which involves conversion from one currency to another, for example, from British pound to US dollars.

Why bother checking around?

This is because there are huge differences in commissions in foreign transactions, in terms of percentage, across different financial organisations. Some do not charge any commission while others impose, often heavy, charges. It is best to look around becasue if you are not careful, you will be contributing to the the already huge bonus pool the top managers get at these organisations. As of 3rd November 2009, the rates of commission the following organisations charge (this list is not exhaustive and not in alphabetical order):

Paypal - 2.5%. Add 0.5% cross border fee. This is waived for UK sellers registered with Paypal in EU when receiving payments in Euros from other EU states. Limit of £3.50 when using eCheques.

Barclaycard, Barclays - 2.75%

Citibank - 2.75%

Egg (Citibank) - 2.95%

HSBC - 2.75% (2.99% for credit cards)

Bank of Scotland/Halifax - 2.75% (2.95% for credit cards)

Natwest/RBS - 2.75% plus £1.25 (2.75% for credit cards)

Nationwide - 0%

Abbey - 2.75% (0% for Abbey Zero card., 2.75% for other card)

Source: From the above organisations websites. Retrieved on 03-10-2009.

What can you do about it?

This depends on your circumstances. If you have credit cards and obviously bank accounts (how can you open a Paypal account without one), check the commission rate for these. In some cases you spend less by using a credit card or debit card. In others, use Paypal especially if you have a Natwest/RBS card which puts hefty charge for foreign transactions (yes, this goes towards the top brass bonuses and less extent other employees). Before you execute a foreign transaction blindly, do the following:

• Check the commissions for any credit and/or debit cards you have.
• Use a calculator to work out the exact amount of commission for Paypal and any other card you have.
• Note that paying using eCheques limits the transaction fee to £3.50. This includes standard and foreign commissions (that's cool).
• Use whatever method which incurs lowest commissions.

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Buying Commemorative Banknotes

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