Exchange rates? What ???

[Stardrifter_WA]

Hi All,

I went to the bank today to find out about a Master Card Travel card, where it is loaded with US dollars. This prevents me having to pay an international transaction fee on every purchase if I use my normal card.

However, when I asked how much US dollars would I get if I put $10,000 on this card?

The answer was a little perplexing. For AUD10,000 I get USD10,035 :question:

I would have thought that I would get closer to the exchange rate of 1.03 which should make it around USD10,000 but no, the bank only gives you 1.0035, as of today. What a rip off. I mentioned that the exchange rate is 1.03 something, so why don't I get that and bank didn't have an answer.

So, why have an official exchange rate, if you cannot actually buy at that :question:

[Barrykgerdes]

Welcome to the money market! Why do you think there are variations in the exchange rates from what is advertised and what you get.

The middle men need to make a nice profit of course!

Barry

[Peter Ward]

Yes, there is no easter-bunny either. Banks always take their cut...just looks at the RBA cash vs the mortgage rate.

The cross rate is also very fickle... I've seen the Aussie peso devalue as much as 5% in a day.

So at least, if you have $US at a particular rate, be happy it won't go further southbound.

[FlashDrive]

Hey Pete ....Mr Rockerfella and Mr Rothschild have to get their cut ...before you get yours ....:D

These 2 guys are soooooooo insanely rich ( a lot more than Mr Gates ).
Both are Merchant Bankers ( kept in the Family to )....it's believed that these guys actually lend to the IMF.

Flash ..!!

[barx1963]

Contrary to popular opinion there is no "official" exchange rate. The rate that is quoted on the TV is the rate that the AU$ is trading at on the wholesale market, which is only accessible for very large trades by money market dealers.
Otherwise it is what the bank you are dealing with is willing to give you, and naturally they set rates to make a profit.

We have found that the best rate is usually using your normal credit card while OS. Those travel card are IMHO not a good idea as the rate is not good, you pay a fee to load it as well, and when my stepdaughter had one in Europe, she found it was hard to use as many merchants wanted photo ID and there was no name on the card so they wouldn't accept them!

Malcolm

[Steffen]

A 3% currency exchange fee is very common for credit card transactions, I would expect this to be similar (which it is). Nobody is going to exchange currency for free.

Cheers
Steffen.

[gary]

Hi Peter,

I keep close tabs on exchange rates and was only looking at the
Commonweath Bank cash/Travel Money card sell rate earlier today
and indeed it was 1.0035, which is exactly what you received.

In fact, during the last few days it was below parity so your timing
was good.

The flip side of the coin is the buy rate, which for cash today from
the Commonweath Bank was 1.0902. For International Money
Transfers from the same bank it was 1.0781.

So there is a lot of "cream" the banks skim between the buy and sell rates.

For manufacturers who import materials at the sell rate but
export finished product at the buy rate, the banks do well out of the
two transactions and opening up the currency markets to everyone is a
major reform that is needed to help improve productivity, but I digress.

As Malcolm correctly pointed out there is no such thing as an
"official exhange rate".

The rate you see on television is commonly known as the mid-market
rate, averaged between the market sell and buy rates.

If you use a credit card billed in Australian Dollars to buy
something overseas, banks such as the Commonweath will also charge
an additional fee to the card holder of about 2.9995%. That's on top
of the low sell exchange rate they provide.

Enjoy your trip.

[barx1963]

One card worth considering is the 28 Degrees credit card which has no oversea transaction fees. A friend that used one said he exchange rate was much the same as his other card. BTW I have no affiliation, just passing on info.

I think it is run by GE Money here http://www.28degreescard.com.au/features.html?gemid2=jun12-28deg-travel-Explore

Malcolm

[Stardrifter_WA]

Thanks Malcolm, I will look into that. I haven't got the card yet as I am not travelling until late July, just checking it out today to find out what I need to do. Only 16 weeks to go.....it seems so damn far away. :sadeyes:

Cheers Peter

[Shano592]

The rate you see on tv is the median price.

Banks then grab their 3-4% off that, in order to make money.

Although not for credit cards, the best funds transfer service I have used is OzForex.

As at this morning :

Quote Details

Selling: AUD 10,000.00 Buying: USD 10,365.00 Rate: 1.0365

OR

Quote Details

Selling: AUD 25,000.00 Buying: USD 25,967.50 Rate: 1.0387

[Stardrifter_WA]

This is becoming rather interesting.

I checked today what the OzForex Prepaid Travel Moneycard was offering and for AUD10,000 I will get US10,479.65 as at 7.30am WAST.

Why would I get it from the bank? Big difference, wouldn't you say? Yes, there are fees attached to the OzForex, however, used carefully, I would still be better off by about $350 over what my bank offered.

Thank goodness for the Internet, a great tool to check if you are getting the right deal and thank goodness that I am savvy enough to know to look. It makes you wonder how many just go along with what the banks says.

Will still investigate how easy this card is to use though, to avoid problems, as Malcolm mentioned earlier. Will also check out the other card Malcolm mentionefd.

You really do have to watch what the banks do. Give them an inch and they will take a ton of cash!

I have a cash management investment account with which I used to save for this trip. Every time I added to it at roll-over I had to ask for a better interest rate, otherwise they automatically rolled it over at the current and lower rate. How many people lose out by just letting it roll over without asking. And when you consider that there are, according to RBA, 30 million :eyepop: term deposits in Australia, many people may be missing out by not managing their finances closely.

I have moved this investment to other banks on three occasions to get a better interest rate.

I sure watch my money. I buy everything on credit card, pay it off before due date, mostly, get the purchase points from my card and use those points to redeem Coles gift vouchers to pay for Christmas food supplies. I watch my investment to ensure I am getting the best rate. So, I use the banks money for convenience, pay no monthly credit card interest and get a small bonus at the end of the year for Christmas. Furthermore, I screw the banks for a better interest rate and pay no account keeping fees, apart from the fee for drawing money from other banks ATM, which I rarely do anyway.

Cheers Peter

[barx1963]

Odd, I just looked at the OzForex site and the rate on money cards was 1.0057 so AU$10,000 would come to US$10057. Thjey apply a different rate for their money cards which is on this page http://www.ozforex.com.au/our-services/travel-card/rates-fees-charges so just be careful!

Malcolm

[gary]

Hi Peter,



Not so fast Pilgrim. :)

You will be looking at the mid-market rate.



Malcolm is correct. At the moment of typing, the OzForex Travel Card USD rate is
1.0056. The equivalent Commonwealth Bank rate is 1.0051. So on AUD10,000,
only $5 in it.

OzForex is partly owned by Macquarie Bank.

Some generic advice that you are free to take or leave -
Now and then people we deal with overseas ask me which way the Aussie Dollar is going.
I tell them that if I knew that I would be talking to them from my yacht in the Whitsundays! :)

Come July when you need the money, the Aussie might have strengthened a lot or a little or it
might have weakened a lot of a little. Nobody knows with any certainty as otherwise in a few transactions
you could become the richest person on Earth. :)

So another strategy is to put your money into one of those fixed term investments, earn a little interest in the meantime
and then convert it when you need it.

But if you do know with any certainty which way the Aussie Dollar will go tomorrow, next week or in 6 months or in a year's time,
please do not talk to anyone else and telephone me! :)

Best of luck.

[Stardrifter_WA]

You are correct, however, their currency converter shows the exchange for 10,000 to be 10,440.05. http://www.ozforex.com.au/our-services/travel-card

Again, it is deceptive, since you actually cannot get that rate, so why have a currency converter on their travel card website. on reading the website, there is only one small sentence that says card rates are different from OzForex money transfers. So, does that mean that if I open an account in the US that I can transfer money at that rate? Probably not. :(

Still, it ain't all bad, considering how low our dollar went in the past. Still the best time to travel.

[gary]

Hi Peter,

if you hover over the link on the converter, it says that it is only the mid-market
rate.

As Malcolm pointed out, you need to use the converter on this page where
it says "click here" -
http://www.ozforex.com.au/our-services/travel-card/rates-fees-charges

And you are absolutely right in that if you can't get that rate, then why show it.

Possibly a better question to ask is why there are no global reforms to allow
wider access to the FOREX market as part of an international trade and investment
initiative. My understanding is that there is currently no central exchange and the
players deal directly with one another.

Though even Japanese housewives invest in the carry trade, they do so through
brokers. To the best of my knowledge, mere mortals can't get online somewhere
and day trade in FOREX.

[PCH]

Hey Gary,

you certainly can get online and trade Forex. I looked at it about 3 years ago and got a trial account for practicing for a while. Once the trial period was up, I decided to give it away as it is so incredibly highly leveraged that it seemed all too risky.

I can't remember the name of the mob that I got the trial account through, but I do remember I just Googled "Forex Trading" to find it.

Incidentally, at an investment seminar I went to, one of the guys mentioned that Forex Trading was currently the fastest way to lose all your money according to some statistics he read out. Whilst I can't vouch for that, I can quite easily see that it would be very easy to lose pots of money real quick.

I know several people who day trade Forex. They don't readily divulge what 'luck' they have though - lol

[gary]

Thanks Paul,

I just did a Google myself. :)

You know if they get Warren Buffett type lucky if they start giving it all away.

[wavelandscott]

I do not know if this works in reverse or not but while living in Australia and being paid in the US I often used my US ATM card at an Australian ATM and converted currency that way.

My US bank did not charge me any fees (and neither did the Australian Bank) and the exchange rate I received on the conversion seemed to be as good as any I could find...sure I was limited to USD$400 worth of money at a time but what the heck, the $AUD was trading at about 0.48 then so a single transaction bought a lot of meat pies!

I often find that for converting smaller amounts of $USD using an ATM turns out pretty good...compared to converting money other ways.

Good Luck!