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Is Capital One’s Currency Exchange Accurate?

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In the last few weeks I’ve had a good conversation with Mark in the comments of this foreign transaction fee post. Mark wanted me to confirm that Capital One was not hiding a fee within the currency exchange rates it was using. Several years ago, there was a lawsuit and subsequent settlement over this very issue. Credit cards were assessing a fee for currency exchange and not disclosing it on statements. Since then, credit card issuers are required to disclose this fee and many itemize it out.

However, as responsible consumers we can’t just take their word for it! Trust, but verify. :)

The quoted rates in the analysis below are taken from this page on USD/GBP currency exchange rates. The rate listed is the number of GBP (British pounds) that can be purchased with one USD (US dollar).

Capital One is one of the only credit card companies that lists the exchange rate right on the statement. It’s not available on the online statement but if you view your paper statement, or the downloadable PDF, after your cycle closes, the rate will be listed.

The tricky part is that the transaction shows when the transaction was posted, not when it actually happened. The exchange rate is for when the transaction occurred, not when it was posted. I had to remember when certain transactions happened to match up the rates. Fortunately it was only a little while ago, and we’ve been writing about our recent trip on Wanderlust Journey, so it was easy to remember.

Here’s how a bunch of transactions compared to the stated exchange rate on the site:

Date Exchange Rate Capital One Rate Difference
19 July 09 0.61216 0.614203455 0.002
20 July 09 0.60485 0.607533414 0.0027
21 July 09 0.60861 0.610128127 0.0015
21 July 09 0.60861 0.610154718 0.0015
21 July 09 0.60861 0.610221205 0.0016

In each case, the rate was within 0.5% of the listed exchange rate on Mark’s referenced website.

Based on just a very small sample size, it appears that Capital One’s rates are fairly accurate.

What do you think?

{ 30 comments, please add your thoughts now! }

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30 Responses to “Is Capital One’s Currency Exchange Accurate?”

  1. If I’m reading the data correctly, the Capital One rate is actually in your favor. If you are in England and purchase something for 614 pounds on July 19, it would cost you $1000 (614 / .614), whereas you would have expected it to be $1003 with the official exchange rate.

    You are getting MORE pounds per dollar with Capital One – in every example in your table.

  2. Jim says:

    Kosmo – you are correct, your dollar buys more pounds with Capital One than if you were given the rate listed on the site.

    Foreign exchange is a tricky business, the large institutional buyers who are purchasing huge chunks of currency are in the first tier. That first tier has the best rates. Everyone else is in tier 2 or lower.

    • My philosophy has always been as long as I’m getting as good (or better) of a deal through than CC than I would get doing the exchange myself, I’m happy. Even if the Cap One rate isn’t as good as a tier 1 rate, it’s still better than you could get in person. If the bank can make a profit on the currency exchange, bully for them.

      • Jim says:

        From a decision making standpoint, do I use cash or use a CC, then I would compare it with the commercial rates.

        If it’s to see if Capital One is making a little money on the sly, hiding a fee in the rate, then I want to know the interbank rate. Unfortunately, I can’t find the spot rate at 2:51PM and be certain I made the transaction then. If I rely on close prices, I can’t say with certainty why there is a % difference. It could easily be attributed to moves in the rate and not profit taking.

  3. Tim says:

    which exchange rate does your link use? there is a difference between commercial exchange rates and wholesale interbank exchange rates. The latter will be a better rate. presumably, capital one is using the interbank exchange rate, versus what was posted on the currency converter website you used, so this isn’t a surprise. What would be better to know is what capital one’s rate versus actual spot interbank rates were.

  4. Tim says:

    also, capital one isn’t one of the only ones that post exchange rates on statements. I have others that do. also, although not directly posted, issuers are required as a result of that lawsuit to post the foreign currency transaction fee.

    • Jim says:

      I didn’t meant to imply they were the only one; just that it’s on the paper statement and I haven’t seen every issuer do it.

  5. dilbert69 says:

    XE.com has a great tool for just this purpose. You can enter multiple transactions and see how much you will pay based on various bank fees:

    http://www.xe.com/tec/table.shtml

  6. freeby50 says:

    Looks honest / fair to me. If the rate with Capital ONe is in your favor then theres nothing to complain about. 0.1-0.2% difference in the rate can be chalked up to Capital One getting a slightly different rate and/or impact from math round off.

    Jim @ Freeby50

  7. Tim says:

    i’m going to guess that the webistes use commercial rather than wholesale interbank. so you can’t really know for sure if you got a good deal unless you charged something on two different cards the same day. Even then, some use spot other use end of day, etc. i know that i’ve used different cards before and have gotten different rates.

  8. Tuxster says:

    I did a similar test about a couple years ago. I took my Capital One card and my American Express card to a few different trips (Toronto, Canada; Istanbul, Turkey; and Milan, Italy). In each of those locations, at the same store, I conducted two different transactions of equal amount (i.e., if I was buying a ticket for a museum, I bought two tickets, one with Capital One and one with American Express within a few minutes of each other). And then when I came back I compared how much I was charged.

    In all three cases, even with the transaction fee charged by American Express, I ended up paying less for my transaction on my Amex card, then I did on the transaction on the Capital One card.

    So, my conclusion was the opposite of yours, that I wasn’t getting as favorable a rate from Cap One compared to Amex. But, again it’s a sample size of three, so not exactly scientific.

  9. joruva says:

    I live overseas and swear by CapitalOne. I’ve done the research, and most credit cards charge anywhere from 2 to 5-percent of the purchase price (Amex and Mastercard are among the worst).

    CapitalOne’s exchange rate is better than when I do an international wire transfer.

  10. joe says:

    Any update(s) on the Currency Conversion Fee Antitrust Litigation (MDL 1409) Settlement? That thing is almost 2 years old, and I still haven’t heard back or received anything about it?!?

  11. eric says:

    I loved my Capital One card when I was traveling.

  12. SteveRay says:

    It’s interesting that this thread seems for the most part to be generally favorable to Capital One.

    Capital One conspicuously avoided responding to my email inquiries about the source it uses for determining foreign exchange rates on credit card transactions — even mentioning in its last reply that it felt it had responded appropriately to my inquiry and would not respond to any further inquiries on the topic. (That, by the way, was after explicitly not answering my question.)

    That doesn’t strike me as an encouraging approach to potential credit card customers, and suggests Capital One isn’t interested in being above-board about its policies.

  13. jillianlou says:

    I consider myself pretty financially savvy but have to say I have never quite understood currency exchange rates. Multiply that by a bunch when dealing with credit cards…

  14. Michele says:

    I have not held a capital one card for years. Lets just say they never did right by me. However, I was traveling in Canada last spring and I used a CC for “incidentals” at the hotel I checked in. I had paid in advance for the room via hotwire.

    Upon checkout, I noticed that they charged the room to my bill, thus double billing me. Despite the fact that I called it to their attention immediately, and they corrected the mistake before I left the hotel, the credit card company took 11 days to credit my account.

    They charged me an exchange fee for the first transaction (the mistaken billing), they charged me a second exchange fee for the reversal, and by the time they got around to crediting my account, the rate had dropped and I got back around 6 dollars less than I originally paid. So in the entire transaction I ended up losing around $12, for the hotels mistake. I just love cc companies.

  15. Belay On says:

    I would like to follow up on Tuxster’s post (see above). I called my credit card company (REI Visa) and Capital One to compare exchange rates and foreign exchange fees. Turns out that even though my credit card charges me a 2% fee, their foreign exchange rate is more than 2% better than Capital One. So despite not charging a FX fee, Capital One’s exchange rate is less favorable so the net difference is minimal between the two cards. Would love to know if anyone else has had a similar / different experience.

  16. Anthony says:

    I just returned from Beijing and the exchange rate used by my Capital One MasterCard is 3% worse than the rate published for the same date by MasterCard on its web site. It is also 3% worse than the exchange rate used on my Visa card (to which fees were then deducted). Specifically, on October 23rd Capital one used a Chinese Yuan exchange rate of 0.155 whereas MasterCard, Visa, and the Wall St Journal give a rate of 0.150 for that date.

  17. Scott says:

    I use my CapOne card for overseas web purchases all the time. Most of the time the price I am quoted by the overseas website is the same amount I am charged on my CapOne CC. However, every once in a while, Cap1 exchange rate varies about 0.5% above the original quoted estimate the foreign vendor quoted me originally. The extra 1/2 percent is always in CapOne’s favor, which is a bit suspicious, but its such a small amount and happens only intermittently (perhaps one time out of five) I never worry about it. In my case, this discrepancy is still far below the 1-3% service fees I have experienced with all my other CCs (Citi, Discover, BoA, and AmEx).

  18. Lloyd says:

    Jim, have you looked at OANDA’s site for an interbank rate on the days you did transactions? This is a good benchmark.

    • Awara says:

      I am planning to buy a travel ticket within Europe thru a website. The website offers rate quotes in both British Pounds and American Dollars. The fare is either 225.00 BPD or $383.50 USD. As per today’s currency exchange rate, thru several websites (xe.com, x-rate.com, etc.) it’s about a $20 dollars difference. Now, to save these $20, I am thinking to use their BPD fare and pay by my Capital One card for which there’s (supposedly) no transaction fee. Should I expect Capital One to follow the current prevalent online rate or will I end up paying more than the $20 I am thinking to save so frugally?

  19. Laura says:

    I just made a purchase of 594 Tunisian dinars with my capital one ticket (for a plane ticket).

    According to xe.com, my go-to website, that purchase should have posted as 424 USD. Instead, it posted at just over 440 USD.

    I spoke at length to a representative on the phone who told me to look at the WSJ’s conversion rates and then admitted that he didn’t really know. He also attempted to redirect to Mastercard.

    The Mastercard website – since my Capital One card does have a mastercard logo in the bottom right corner – lists the exchange rate between dinars and dollars at 0.7428; xe.com’s exchange rate is 0.724. This resulted in a ~$16 difference – doesn’t sound much better than a simple mastercard or visa, does it?

    I’m hesitant now to use this card, as I’m living abroad and make quite a few purchases in North Africa. CA has been my go-to card, but I’ve never had a disappointing exchange rate before.

  20. Gareth says:

    xe.com quotes mid-market rates, not the same thing as buying or selling rates which always offset these values by a small amount. I use xe.com both as a guide and to transfer money internationally. Even when you use their money transfer service you do not get the mid-market rate on the general page.

    This is not a negative against xe.com in any way, I love their service, just the way it is.

    The credit card companies, banks or foreign exchange places will never give the same value as xe.com.

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  22. Henry says:

    I used my Capital One card to buy some plane tickets in China and it cost a total of 18,470 CNY. On my credit card statement, the exchange rate listed was 6.141 which matches what I could find on the Mastercard web-site for that transaction date but I was charged $3,082.56. This calculates to an actual exchange rate of 5.992 which is 2.5% worse and I was essentially overcharged by $75. I’m pretty pissed with Capital One at the moment . . .


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