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American Express Skews Exchange Rates? by Luke
Exchange rates can be incredibly tricky to determine, and until recent lawsuits, credit card issuers have added costs for purchases made in foreign countries without openly disclosing those fees to consumers. Now, many companies are much more forthright as they disclose fees, but customers have to be on their toes as the fine print can be confusing. We decided to take a close look at how American Express determines the total fee added to a foreign currency purchase and whether or not the fee is skewed. If it is skewed to the customer’s disadvantage, we wanted to know by how much. How an Exchange Rate is Determined The Fine Print — How American Express Determines an Exchange Rate
This is interesting, because essentially what American Express is telling us here is that they do NOT base their exchange rate on the rate they actually paid for the currency in question. Instead they search for the highest rate that another source paid for a currency, then add an additional 2%. The Truth Comes Out Since we have no way of knowing what American Express actually paid to purchase a currency, only American Express knows how much they profit by engaging in this practice. However, with this formula, the consumer will almost always be getting a worse rate than what American Express paid for the currency in question. One thing we can discover though is the actual fee American Express charges based on third party wholesale rates. By using the method described in this article, I took purchases made from August 1st – August 15th while in Canada. I made seven purchases on my AmEx card. In every case the markup was higher than 2%. The lowest total fee (above the wholesale rate) that I paid for a transaction was 2.3323%. The highest was 2.8260%. Still, this is very anecdotal. Although American Express does not differentiate between the posting date and the transaction date on their statements, perhaps the exchange rate got worse over that period of time. Whether you feel American Express is justified in this practice or not, one thing is clear: American Express customers should expect to pay more than a 2% effective fee for using an American Express credit card internationally. If American Express wanted to fully disclose the actual fee being charged, they would itemize the fee line by line since it varies from purchase to purchase. Have you used your American Express card internationally recently? We want to hear about your experience. Contact us, or post details below!
16 Comments to "American Express Skews Exchange Rates?"
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August 26, 2006 
We received some complaints from travelers that American Express skews foreign currency exchange rates before adding a 2% 
Comments (16)
We recently made arrangements for transportation from the airport in Mexico with Lomas Travel. For payment, we asked them if they accepted Amex. They said “yes, but we charge an extra 5% to take that card”. They couldn’t explain why they charged the extra 5%, they just did. Any ideas why they would charge extra for that card?
You’re being scammed. They are not allowed to randomly charge customers more for using a card. Report the merchant to AMEX!!!
It is common in many countries to charge more to accept American Express, as the merchant fees which American Express subtracts from the amount the vendor gets are substantially higher than Visa and MasterCard.
As to the exchange rate – I’m seeing often 3%+ for purchases on USD-AUD. I guess they can find substantiation for a bad exchange rate. And what they’re actually “paying” is probably a different issue altogether as American Express in all these countries will most likely be exchanging money between each other without fees.
Amex is still charging exchange rates on Canadian to American dollars. We should be getting more, not less.
[...] experiment In the past, I had heard that Amex used inferior exchange rates, so to test that theory I set up an admittedly imperfect experiment, pitting my Starwood American [...]
Editor
I wanted to update you on what I believe vague disclosure of currency conversion fees by American Express.
This is just one example of my recent American Express Transactions;
On March 10, 2009 I was charged 303.75 CAD (Canadian Dollars). My American Express statement showed that I was charged $245.17 USD (US Dollars). The conversion factor for this transaction is 1.2389362 (303.75CAD/$245.17); this includes the effect of American Expresses 2.7%. When adding in the 2.7% conversion fee, the effective conversion rate was 1.2733157. The Interbank Rate per Oanda.com (the source American Express uses) on 3/10/09 was 1.29059. So what is the difference between the effective currency rate of 1.2733157 and the actual Onada.com rate of 1.29059?
This is one example and it happens continually with American Express, so your chart should be updated to reflect the actual rate American Express charges which in this case was 4%.
The back of my American Express Statement includes the following language regarding Currency Conversions:
“Transactions Made In Foreign Currencies:if you incur a charge in a foreign currency, it will be converted into U.S. dollars on the date it is processed by us or our agents. Unless a particular rate is required by applicable law, we will choose a conversion rate that is acceptable to us for that date. Currently, The conversion rate we use for a charge in a foreign currency is no greater than (a) the highest official conversion rate published by a government agency, or (b) the highest interbank conversion rate indentified by us from customary banking sources on the conversion date or the prior business day. In each instances increased by 2.7%. The conversion rate may differ from rates in effect on the date of your charge. Charges converted by establishments (such as airlines) will be billed at the rates such establishements uses.”
The following is the Onada.com CAD/ USD exchages on 3/10/09
, March 10, 2009
1 US Dollar = 1.29059 Canadian Dollar
1 Canadian Dollar (CAD) = 0.77484 US Dollar (USD)
Interbank rate +/- %
This means:
You buy 1 US Dollar : 1.29059 Canadian Dollar
You sell 1 US Dollar : 1.28989 Canadian Dollar
You buy 1 Canadian Dollar : 0.77484 US Dollar
You sell 1 Canadian Dollar : 0.77526 US Dollar
Median price = 1.28989 / 1.29059 (bid/ask)
Minimum price = 1.28095 / 1.28175
Maximum price = 1.30630 / 1.30670
I have a very similar situation as described by BJ. I called AMEX, as I need to have an itemized statement in order to be reimbursed by my company, and it took me a half-dozen people to tell me what the exchange rate they used was (which still did not convert to the amount they listed on my statement, plus the 2.7% transaction fee). They couldn’t even tell me if they posted the charge on the day of, or at a later date.
Each time I spoke with someone, they told me that they couldn’t tell me what the exchange rate was, or what the exact amount of the 2.7% was — I responded each and every time: “How come you get to know that information, and I, the customer, can not have access to that information?”
I asked to have the exchange rate they used in writing, as per company policies, and who knows if I will receive that.
I also asked how I can ensure that I will know the exchange rate used in the future, as it is not listed on their statements — the answer: go to the local AMEX travel office and ask. My response: Each day that I’m in a foreign country? Answer: Yes.
WTF?
I’m sticking with Capital One next time, even though I get better points, etc with AMEX. Capital One hasn’t burned me.
American Express is still skewing exchange rates. I made several large charges in Brazil and the rate used was by American Express was 2.17 versus 2.683, which is the official Central Bank rate for that date and the interbank rate for that day. In fact, on American Express’ website they show 2.21673 as the rate in effect that day.
I have asked for evidence of how they arrived at the rate and no one can answer that question. I am considering initiating an arbitration to get to the bottom of this.
Gyus, are you telling that Amex should not be used travelling abroad?
Well, I did receive the letter they promised, and it was a bit higher than the interbank rate (but if you read the fine-print they state that they can use the highest rate published from nearly any source that day).
Included in the letter was an itemized list: the amount charged; the exchange rate; and how exactly much the 2.7% was. I was able to turn this letter into my company for reimbursement.
I took about two weeks to receive this; I received a letter prior to it stating that they had to do more research.
It was a pain and I’m not sure if I will put up with it in the future. Customer service was horrible until I spoke with a manager of a manager. If you try to call to do the same thing, and the CSR can’t help right away: ask to speak with their manager.
Hopefully, AMEX will find out that transparency is best!
I have a French American Express and they apparently charge an average of 1.3 % above the same day’s exchange rate. I chose AmEx because it supposedly didn’t charge the usual 1% fee, but what I find instead is that they have a >1% fee built into the exchange rate. Very deceptive IMO.
From June 8 – 15, AMEX avg exchange rate from US $ to CAD $ was 1.07 and CitiBank Master card was 1.12.
Obviously AMEX has worse exchange rate than Visa/Master Card.
The bottom line is to not use AMEX oversea.
The worst is I called AMEX before I left for Canada. The CSR told me to use AMEX because its conversion fee is 2.7% and others are 3%. But their exchange rate is 5% lower than others. What a joke!
FORGET ABOUT USING YOUR AMEX CARD OVERSEAS IF YOU CAN AVOID IT
i’ll never ever be using my amex card overseas again! i’ve been charged AUD$904 more than i had expected when i purchased an item in hong kong for HKD$88100. the amount i had expected to see on my statement when i returned to australia was AUD$14,110. i worked out this amount based on the conversion rates shown on xe.com
instead, they debited AUD$15,014 from my credit card account. this is ludicrous! on top of that… they charged AUD$500 in conversion fees!! that’s a total rort of AUD$1,404!!! not happy )c:
i really wished i had gone to this webpage before i had made my purchase. arrrggghh!!
Just recently AMEX (in the US) has changed the way they display a charge originating from a foreign currency transaction. In the past they showed the amount in the foreign currency and the final U.S. Dollar amount; this at least allowed you to verify that the foreign currency charge is correct and you can calculate the effective conversion rate.
Now they show only the U.S. Dollar amount and even customer service (phone) wont tell you the original foreign currency amount.
Whatever their intent is, it certainly results in even less transparency for the customer.
I wonder if there may be even legal implications?!
Here is another scenario: What if you purchase something in a foreign currency and return it in that same foreign currency two days later when the exchange rate has gone up? The returned dollar amount can be lower than purchased dollar amount (once the conversion is done). So you may end up paying a significant mullah for a purchase that should bread even for you. My advice: if the store offers to charge your card in Dollars go for it. I know some stores in the UK can do that.
Here is another scenario: What if you purchase something in a foreign currency and return it in that same foreign currency two days later when the exchange rate has gone up? The returned dollar amount can be lower than purchased dollar amount (once the conversion is done). So you may end up paying a significant mullah for a purchase that should been even amount on your statement. My advice: if the store offers to charge your card in Dollars go for it. I know some stores in the UK can do that.