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10 Sep 2007 16:04
Travellers’ cheques could be your cheapest option when going overseas, especially in the United States, but are not always the most convenient currency choice.
Thanks to the National Credit Act, banks are now required to disclose the full fees charged on a transaction, which highlights the cost of credit card transactions.
This came to light when a friend received her credit card statement recently and found a R19 fee for “international currency conversion MasterCard”.
This equated to 2% of the transaction.
According to the banks, this fee, which includes the MasterCard/Visa charge to the bank, has always been in the transaction costs as a currency convergence fee, but previously had been built into the rand cost of the purchase. Not all banks are disclosing this fee separately.
To understand the costs of foreign currency fully I asked the banks to assume exactly the same value transaction using a credit card in a store, an ATM withdrawal with a credit card, using travellers’ cheques and taking cash.
According to Standard Bank, based on a $2Â 000 transaction, the total costs would be:
These are surprising findings as credit card providers have always suggested that credit cards are the cheaper option and cash has always been touted as the most expensive option.
But before you rush off to buy travellers’ cheques, there are some things to consider.
Lovemore Fuyane, head of retail foreign exchange at FNB, says pre-purchasing your currency is a good idea in highly volatile markets.
* Standard Bank charges R20 for a foreign cash withdrawal. This varies between banks with Virgin Money being the cheapest at R8,75. This fee does not include an additional fee that might be charged by the foreign ATM
** This does not include commission for cashing in the travellers’ cheques, although there is not always an additional fee, especially in the US
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