Who determines the exchange rate

Exchange rate, debit card credit card- Not many people are aware of the fact, but with few exceptions, it's not your bank that decides what exchange rate you get, says Anders Fagereng, Daily Manager in the consumer portal Dinero.no. Photo: Dinero.no

Who sets the exchange rate on your cards?

Many believe the bank decides what exchange rate when you shop or make withdrawals in foreign currency, but that is incorrect. The payment network decides most of the time.


But what is a payment network? Norwegian debit cards have an international payment network linked to their card in addition to BankAxept. The most popular payment networks linked to Norwegian cards are well-known Visa and MasterCard, which also enables payment by credit cards, as these usually do not have BankAxept. These networks also determine which exchange rate you get when you make transactions using foreign currency.

– Not many people are aware of the fact, but with few exceptions, it’s not your bank that decides what exchange rate you get, says, the Daily Manager of the consumer portal, Anders Fagereng to Dinero.no.

Little difference between Visa and MasterCard

Dinero.no has analyzed and compared the exchange rate that Visa and MasterCard have offered for a long time. The result of the survey shows that it is virtually irrelevant which of these payment networks you have linked to your card.

– Visa may be a few cents cheaper per € the one day and MasterCard may be cheaper the next. In the long run, these networks are basically equivalent regarding the exchange rate. At the same time, both are accepted the vast majority of places in the world, says Fagereng.

Withdrawals and payments using NOK rather than the local currency

There are exceptions to who decides the exchange rate. If you choose Norwegian crowns instead of local currency if the ATM or shop offers you this option, this will override this payment network’s ability to decide the exchange rate.

In the majority of cases, you get a much poorer exchange rate if you choose to get the amount converted to NOK then and there – since it is the shop or the ATM itself that then determines the exchange rate. Fagereng recommends to always choose local currency rather than converting to NOK or whatever your domestic currency may be.

– Visa and MasterCard both offer more competitive exchange rates than a shop or ATM does. You stand to lose a lot if you make the wrong choice, Fagereng states.

In fact, the markup can be ten per cent higher if you choose your own currency. In other words, for a purchase or withdrawal of NOK 5,000, it amounts to donating NOK 500.

Another exception is if you possess an American Express or Diners Club card. With these cards, it is the issuing bank, DNB via DNB Markets or SEB, respectively, who determine the price.

The factual exchange rate is not available before accounting

Please note that the money you spend will first be reserved on your card, the final amount will be accounted at a later time. The exchange rate may be different between the reserved and accounted date, so it’s only when the amount is finally posted that you know which exchange rate you got.

It may take several days for a transaction in foreign currency to be booked.


© Dinero.no / #Norway Today

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