Warning: Don’t Pay in Singapore Dollars When Shopping Overseas

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Do you know of the different kinds of fees applicable when you make an overseas transaction?


A friendly tip on how to avoid unnecessary fees.

Whether you’re making a transaction in a shop abroad or on an overseas website, you have to pay fees on transactions made in foreign currencies or Singapore dollars, as well as charges applied by the payment network and bank administration.

Though these fees are a pittance compared to the total amount you’re paying, it is important for you to know about these charges before you splurge in foreign locations. To keep yourself informed, all you need to do is read your credit card’s terms and conditions document. But you probably wouldn’t want to do that. Lucky for you, we’re here to help.

A friendly tip on how to avoid unnecessary fees

Here’s a quick look at how you’ll be charged on your foreign transactions, irrespective of whether they take place at a physical store or online:

  1. Transactions in foreign currency – Bank administrative charges, as well as charges put forth by card associations (such as Visa, Mastercard, American Express).
    • The combined fees from most card issuers in Singapore typically range from 1% – 3.0%. CIMB Visa Signature and CIMB Platinum Mastercard do not charge admin fees from the bank.
  2. Transactions in Singapore dollars but processed abroad – Card association fees (around 1%) and other not-so-transparent potential markups. The potential markups are usually applied at the point of transaction and need to be acknowledged and accepted by you.

Now, the question is whether you should pay in Singapore dollars or foreign currency while transacting overseas.

Firstly, paying in Singapore dollars will not save you from foreign transaction fees. The notion that doing so will save you from foreign transaction fees is nothing but a misconception. Sadly, it isn’t just the foreign transaction fee that you should be worried about.

There is also something known as a Dynamic Currency Conversion (DCC) fee attached to your overseas transactions too, especially if you are using a Mastercard or Visa.

What is Dynamic Currency Conversion (DCC)?

Have you ever noticed that when you’re shopping abroad, you sometimes get asked if you’d like to pay in your home currency or the local currency? If you opt to pay in your home currency, the merchant will convert the foreign currency amount to Singapore dollars on your behalf. That service is called Dynamic Currency Conversion.

For many of us, we’re obviously happily spending and we’ve no idea what exchange rate our credit card company will use when they convert our foreign currency transaction to Singapore dollars. So when offered an instant conversion, it sometimes feels more worthwhile to go with the converted amount.

Unfortunately, the certainty of knowing how much your transaction will cost in your home currency does not come cheap. For providing the DCC services, merchants will layer on a markup on the currency exchange rate, sometimes going as high as 5% or more.

Remember, opting to pay in Singapore dollars does not save you on the foreign transaction fee. Your credit card issuer will still charge the admin fees (around 1%) on the foreign transaction in addition to the DCC markup that you paid to the merchant. In order to save, the DCC markup needs to be less than 2% at least, something that’s quite unlikely.

How can you avoid incurring unnecessary DCC charges?

Here are a few suggestions:

  • Always opt to pay with the local currency (the currency of the location you are at) instead of Singapore dollars.
  • If the merchant insists that you pay in SGD, ask for the transaction to be voided and consider shopping elsewhere.
  • Write ‘DCC rejected’ on the credit card charge slip on both copies – the merchant copy as well as yours. This will help your case if you choose to raise a dispute.

In short, when using a credit card for your purchases abroad, do not pay in Singapore dollars. It tends to be costlier as compared to paying in foreign currency with your credit card. Always keep in mind that foreign transaction fees and dynamic currency conversion fees come into play. So, you need to be constantly vigilant when using your credit card for overseas shopping.

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