Banks are stealing money from you! Here’s why

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Following up on The Strait’s Times article on how paying in SGD$ abroad will rack up unnecessary charges, we’ve come up with an article about how exactly you’re losing your precious dollars to your bank – without even knowing!

There are two ways that banks are able to overcharge you:

  • When you pay in SGD Overseas
  • When you online shop on an international site in SGD$

How do banks charge extra when you’re overseas?

You always pay in SGD. The bill is clearly stated on the receipt. What’s wrong?

You’ve just been overcharged! Whenever you’re travelling and you pay in your home currency, the bank uses DCC (Dynamic Currency Conversion) to convert the money at the point of sale.

First things first, what is DCC?

It’s basically a service where Visa or Mastercard holders can pay in their home currency when making a payment overseas.

And exactly why is it so bad?

Here’s an excerpt from the DBS website:

“If your card transaction is converted to Singapore dollars via dynamic currency conversion, you acknowledge that the process of conversion and the exchange rates applied will be determined by the relevant merchant or dynamic currency conversion service provider. All card transactions which are converted will be subject to an administrative fee of 2.8% on the converted Singapore dollar amount.

There are two equally alarming points here. Firstly, the exchange rates applied are NOT standard. The merchant (i.e. the shop you’re buying from) determines the exchange rate and more often than not, they’ll charge a higher rate than if you had paid in local currency. Why? The banks give them the extra money earned from the conversion.

Secondly, the banks charge you an administrative fee, on top of the horrible exchange rate that you’ve just been charged. According to DBS, DCC can set you back around 7% to 15% of your entire purchase. Imagine if you’re paying for your hotel fee overseas and the total bill racks up to about $1000 – You might just end up paying up to an extra $150 without even knowing!

Save your money! 😱

How do banks charge extra when you’re online shopping locally?

You might be shopping on an international site right here in Sunny Singapore, but do you realise that you’re actually being charged extra when you pay in SGD?

Example: Airbnb

When converting on Google, US$738 = SGD$1006. You can already see that paying in SGD is more expensive, and what’s more, remember that the 2.8% administrative fee is still applicable. That amounts to a total of SGD$1,067, which is SGD$61 of losings, just by transacting in local currency!

In this case, there’s almost no way to avoid the fees, unless you have a US credit card, or you use certain eligible credit cards that do not charge or charge lower overseas transaction fees.

So how do I avoid being overcharged?

There are a couple ways to do this.

Firstly, always ask to be charged in your local currency. The merchant is violating Visa and MasterCard’s rules if they don’t give you a choice so you can always dispute the charge. You can check out the Visa DCC policy here and the Mastercard DCC policy here on page 8.

Secondly, choose to use a card with a better overseas transaction rate. Here’s a table of the rates:

Note that American Express does not support DCC! Even though AMEX can be more expensive on certain cards, it’s a whole lot better than paying the DCC rate (that is often not clearly stated).

In summary, just try to avoid DCC as much as possible. Although you may get your money back after the dispute, it’s a big troublesome inconvenience while away on holiday!


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