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Reading the description of the interchange fee cap, it sounds like the cap should apply also for US-issued cards used in the EU [0]: > ... the capping of inter

Reading the description of the interchange fee cap, it sounds like the cap should apply also for US-issued cards used in the EU [0]: > ... the capping of interchange fees should result in lower fees charged by banks to retailers for processing card payments. If users of US cards still get 5% rewards when using their cards in the EU, I'm curious about who pays for the 4.7% shortfall. [0] https://ec.europa.eu/commission/presscorner/detail/en/MEMO_16_2162 https://ec.europa.eu/commission/presscorner/detail/en/MEMO_1...

sofixa 3y ago
The card issuer and potentially the consumer via atrocious fees and a terrible exchange rate? I have a French-based American Express and their exchange rate + commission on any foreign currency transaction is flat out absurd (I'm talking like 50 euros commission on a 1k USD transaction, + a very bad course resulting in a total ~100+ euro difference than if I pay with a Revolut/N26/BoursoBank no-fee foreign currency payment card).
- rockostrich 3y ago
  Pretty much all Amex cards with an annual fee have no foreign transaction fees as a benefit. The issue is that a lot of small business merchants outside of the US don't accept Amex (or will at least say they don't to avoid the higher interchange fee).
  - Too 3y ago
    Every foreign exchange writes "no transaction fee". What they forget to mention is their exchange rate.
  - sofixa 3y ago
    Not in France - I have an Amex Platinum and with it I get the above described absurd fees and bad exchange rates. Funnily I've gotten notified a couple of times by Amex, as per ECB regulations, that the course they've used is significantly worse than the official one.
  - renhanxue 3y ago
    I don't think that's the case outside the US. Sweden here; all of the Amex cards available locally charge a 2% currency exchange fee.
  - ValentineC 3y ago
    > Pretty much all Amex cards with an annual fee have no foreign transaction fees as a benefit. Even in the US, this is not true. The Blue Cash Preferred and Everyday Preferred cards have foreign transaction fees, as does the Business Green card. Practically all non-US-issued Amex cards have foreign transaction fees as well. The US card market seems to be very competitive on that front.
- dkjaudyeqooe 3y ago
  I only use cards without FX or other fees. The amount is charged to the US card in Euros and Visa or Mastercard take a 50 basis point commission on the currency conversion, but since their settlement is not real time (end of day in US or something) often this can be a exchange rate win depending on your luck.
- woobar 3y ago
  Interesting. Europe has stricter regulations that cap interchange. As a result not a lot of rewards cards and less competition in that space. In US no caps, but much more players in the rewards cards space. I've checked recent foreign transactions and it looks like both of popular travel cards make some money on exchange rates, but not as much as in France. Amex Plat did not charge foreign fee, but exchange rate is 1% less favorable according xe.com Chase Sapphire Reserve also no fees, exchange rate is 0.3% different from xe.com
  - sofixa 3y ago
    > I've checked recent foreign transactions and it looks like both of popular travel cards make some money on exchange rates, but not as much as in France Don't get me wrong, there are tons of options for cheap or downright free foreign exchange transactions (such as Revolut, N26, Fortuneo, BoursoBank just in France). It's Amex in particular that are borderline scamming their French customers on foreign transactions.
    - woobar 3y ago
      Never heard about others but Revolut is not a great example. 1% exchange fee plus another 0.3% on exchange rate. I agree that Amex is scamming their european customers. But my point was that they don't do it in US despite the lack of regulations. Same Amex is nicer to their american customers than Revolut to europeans. And one of Revolut's main selling points is their great exchange rates. https://www.revolut.com/currency-converter/ https://www.revolut.com/currency-converter/
bombcar 3y ago
It’s uncommon enough that the credit card processors just eat the fee difference. Probably the issuing bank and not VISA/MC. The number of people who can effectively use/abuse this consistently is probably pretty low.
- dkjaudyeqooe 3y ago
  > abuse Yes using the card as designed and promoted I don't know how I live with myself.
  - jacobgkau 3y ago
    "Abuse" in this context would probably mean intentionally getting a credit card in the US and then making a bunch of purchases in the EU with the specific intention of screwing over your bank/card company with the interchange fee difference, which obviously not many people are going to have the will, time, or money to do, especially not "consistently." Even just using the word "use," US cards are designed for and promoted to people who live in the US, and are likely to do most (if not all) of their shopping in the US. Absolutely, there's nothing morally wrong with getting a US card and using it a bunch in the EU, but the point is that the number of people doing that is low enough for the banks/card companies to just subsidize the fees.
    - dkjaudyeqooe 3y ago
      There is no possible way to construe abuse. None. Zilch. Credit cards, from nearly their inception, have been widely promoted to be used when travelling. The cards could charge for foreign transactions but they choose not to, obviously to promote use overseas. They could simply specify that the rewards only apply to US purchases, yet they don't. They could notice that I've been committing this "abuse" for TEN YEARS and cut me off, yet they don't. They keep on upgrading me instead.
      - jacobgkau 3y ago
        > Credit cards, from nearly their inception, have been widely promoted to be used when travelling. Sure, many of them might be "promoted" for travel (never mind you not providing any citations or statistics for this statement). The vast majority of people probably can't afford the money or vacation time to travel internationally more than once, maybe twice per year (at least in the United States, where most destinations require going overseas). Nobody is attacking you, no need to take this so personally. The point was that the reason they still give you the rewards that the EU's lower processing fees can't fund is possibly because they're making enough extra from the customers not doing what you're doing to fund it. That's all.

sofixa 3y ago

The card issuer and potentially the consumer via atrocious fees and a terrible exchange rate? I have a French-based American Express and their exchange rate + commission on any foreign currency transaction is flat out absurd (I'm talking like 50 euros commission on a 1k USD transaction, + a very bad course resulting in a total ~100+ euro difference than if I pay with a Revolut/N26/BoursoBank no-fee foreign currency payment card).

rockostrich 3y ago
Pretty much all Amex cards with an annual fee have no foreign transaction fees as a benefit. The issue is that a lot of small business merchants outside of the US don't accept Amex (or will at least say they don't to avoid the higher interchange fee).
- Too 3y ago
  Every foreign exchange writes "no transaction fee". What they forget to mention is their exchange rate.
- sofixa 3y ago
  Not in France - I have an Amex Platinum and with it I get the above described absurd fees and bad exchange rates. Funnily I've gotten notified a couple of times by Amex, as per ECB regulations, that the course they've used is significantly worse than the official one.
- renhanxue 3y ago
  I don't think that's the case outside the US. Sweden here; all of the Amex cards available locally charge a 2% currency exchange fee.
- ValentineC 3y ago
  > Pretty much all Amex cards with an annual fee have no foreign transaction fees as a benefit. Even in the US, this is not true. The Blue Cash Preferred and Everyday Preferred cards have foreign transaction fees, as does the Business Green card. Practically all non-US-issued Amex cards have foreign transaction fees as well. The US card market seems to be very competitive on that front.
dkjaudyeqooe 3y ago
I only use cards without FX or other fees. The amount is charged to the US card in Euros and Visa or Mastercard take a 50 basis point commission on the currency conversion, but since their settlement is not real time (end of day in US or something) often this can be a exchange rate win depending on your luck.
woobar 3y ago
Interesting. Europe has stricter regulations that cap interchange. As a result not a lot of rewards cards and less competition in that space. In US no caps, but much more players in the rewards cards space. I've checked recent foreign transactions and it looks like both of popular travel cards make some money on exchange rates, but not as much as in France. Amex Plat did not charge foreign fee, but exchange rate is 1% less favorable according xe.com Chase Sapphire Reserve also no fees, exchange rate is 0.3% different from xe.com
- sofixa 3y ago
  > I've checked recent foreign transactions and it looks like both of popular travel cards make some money on exchange rates, but not as much as in France Don't get me wrong, there are tons of options for cheap or downright free foreign exchange transactions (such as Revolut, N26, Fortuneo, BoursoBank just in France). It's Amex in particular that are borderline scamming their French customers on foreign transactions.
  - woobar 3y ago
    Never heard about others but Revolut is not a great example. 1% exchange fee plus another 0.3% on exchange rate. I agree that Amex is scamming their european customers. But my point was that they don't do it in US despite the lack of regulations. Same Amex is nicer to their american customers than Revolut to europeans. And one of Revolut's main selling points is their great exchange rates. https://www.revolut.com/currency-converter/ https://www.revolut.com/currency-converter/

bombcar 3y ago

It’s uncommon enough that the credit card processors just eat the fee difference. Probably the issuing bank and not VISA/MC. The number of people who can effectively use/abuse this consistently is probably pretty low.

dkjaudyeqooe 3y ago
> abuse Yes using the card as designed and promoted I don't know how I live with myself.
- jacobgkau 3y ago
  "Abuse" in this context would probably mean intentionally getting a credit card in the US and then making a bunch of purchases in the EU with the specific intention of screwing over your bank/card company with the interchange fee difference, which obviously not many people are going to have the will, time, or money to do, especially not "consistently." Even just using the word "use," US cards are designed for and promoted to people who live in the US, and are likely to do most (if not all) of their shopping in the US. Absolutely, there's nothing morally wrong with getting a US card and using it a bunch in the EU, but the point is that the number of people doing that is low enough for the banks/card companies to just subsidize the fees.
  - dkjaudyeqooe 3y ago
    There is no possible way to construe abuse. None. Zilch. Credit cards, from nearly their inception, have been widely promoted to be used when travelling. The cards could charge for foreign transactions but they choose not to, obviously to promote use overseas. They could simply specify that the rewards only apply to US purchases, yet they don't. They could notice that I've been committing this "abuse" for TEN YEARS and cut me off, yet they don't. They keep on upgrading me instead.
    - jacobgkau 3y ago
      > Credit cards, from nearly their inception, have been widely promoted to be used when travelling. Sure, many of them might be "promoted" for travel (never mind you not providing any citations or statistics for this statement). The vast majority of people probably can't afford the money or vacation time to travel internationally more than once, maybe twice per year (at least in the United States, where most destinations require going overseas). Nobody is attacking you, no need to take this so personally. The point was that the reason they still give you the rewards that the EU's lower processing fees can't fund is possibly because they're making enough extra from the customers not doing what you're doing to fund it. That's all.