When you use your credit card overseas, you get hit by two types of charges. The first is a fee imposed by Visa/Mastercard/American Express, typically 1%. The second is a foreign currency transaction fee imposed by the bank, which can be anywhere from 1.5% to 2.5%.
In other words, your foreign currency transaction can cost you anywhere from 2.5%-3.5% more than the SGD-converted amount (and that’s before taking into account foreign currency spreads). Is it worth using your card overseas to earn miles then? The simple answer is: it all depends on your valuation of a mile.
HSCB is raising foreign currency transaction fees from 1 November
With effect from 1 November 2018, HSBC will be increasing its foreign currency transaction fee from 1.5% to 1.8%. This is on top of the 1% charged by Visa/Mastercard, so your total transaction cost will be 2.8%.
Here’s how total transaction fees vary by bank in light of this change:
|UOB||3.1% (3.25% from 9 Mar 20)||3.25%||UOB PRVI Miles MC/Visa, UOB Reserve, KrisFlyer UOB: 3.25%|
|AMEX||N/A||2.5% (2.95% from 1 Mar 20)|
What’s interesting to note is how these fees have edged up over time. DBS raised its fee from 1.5% to 1.8% at the end of 2016, and Citibank raised its foreign currency transaction fee from 1.8% to 2% in October this year.
And although foreign currency transaction fees are increasing, overseas spending bonuses are not.
- DBS Altitude continued to earn 2.0 mpd overseas after the 2016 rate hike
- HSBC’s Visa Infinite will still continue to earn 2.0/2.25 mpd on overseas transactions after 1 November depending on whether you qualify for the regular or step up earn rate.
- Citibank PremierMiles and Prestige have increased their foreign currency mpd from 2.0 to 2.4, but this is a temporary move until 31 December 2018. The increase in foreign currency transaction fees is permanent
The best card for overseas spending
What’s the best card for overseas spending now? That’s undoubtedly the BOC Elite Miles World Mastercard, which gives you 5 mpd on overseas spending until 31 December 2018, without cap, for a 2.5% foreign currency transaction fee.
By all logic this card should be dominating the market, but sadly its 6-8 week fulfillment time (I’ve heard reports of people who applied on card launch day in end July just getting their cards last week) means this is a product only suited for those with lots of patience.
You can also consider using the UOB Visa Signature, which awards 4 mpd on overseas spend for a 2.8% foreign currency transaction fee, provided you spend a minimum of S$1,000 overseas in a given statement period. The 4 mpd is capped at S$2,000 of overseas spending in a given statement period.
The SCB’s Visa Infinite’s overseas earning rate may sound impressive at 3 mpd, provided you spend S$2,000 or more in a statement period, but beware of their hefty 3.5% transaction fee. If you work for a company that reimburses you based on the final SGD charge billed to your card, then by all means go for it. Otherwise, you might want to explore other options.
Fee hikes are never welcome, but I’ve no real complaints about HSBC hiking their foreign currency transaction fee given that they provided adequate advance notice. In any case, I’m not using their cards for overseas spending. My strategy is to continue to make hay with the BOC Elite Miles World Mastercard while the sun shines.
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