MasterCard Foreign Exchange Rate - For Reliability
Ever wondered how MasterCard converted your Canadian dollar expenses to US dollars as reflected in your credit card
statement when you vacationed to Victoria Island recently to soak in the renowned beauty of the Butchart
Part of the answer can be found at the website of MasterCard where there is a MasterCard Currency Conversion Tool.
On a daily basis, this gives you the MasterCard foreign exchange rate for the day for about 45
currencies in the world. For countries not shown in the MasterCard Currency Conversion Tool, the credit card issuer
may request MasterCard and sign up to receive their TO57 Currency Conversion Rate File for unlisted countries and
MasterCard Currency Conversion Tool
First of all, you must remember that MasterCard is not a credit card issuer. Rather, it is a provider of electronic
payment methods. Merchants or sellers and credit card issuing financial institutions use the global payment
infrastructure and network operated by MasterCard. MasterCard's principal business is facilitating and the
processing of payments between the banks of merchants and the credit card companies. For foreign transactions,
MasterCard also determines the exchange rate to be used.
The MasterCard Currency Conversion Tool was initially created in compliance with a provision of Title III of the
Payment Services Directive in Europe requiring financial transparency in credit card transactions. Since then,
MasterCard has extended this service to all parts of the world and for all currencies. Just simply identify the
base currency or the currency of the foreign transaction and this will instantly be converted to your home currency
to form the basis of your payment.
The MasterCard foreign exchange rate is derived from multiple sources such as Bloomberg, Reuters, Central Banks,
and others. It reflects the wholesale market buying and selling rates for the various foreign currencies or the
government-mandated rates for these that MasterCard collects as standards to set the daily foreign exchange rates.
How would you know which rate and for which day did MasterCard used to convert your foreign currency expense into
your home currency as shown in your credit card billing statement?
The date when you incurred the foreign exchange expense, or the date of your purchase is not the date that
MasterCard uses as reference to perform currency conversion to determine how much you will pay in US dollars.
Rather, it uses what it calls the 'settlement date' as the date when the conversion will be made, thus applying the
MasterCard foreign exchange rate for that day. Depending on the fluctuation of the US dollar, the amount in your
credit card statement may actually be higher or lower than the rate when you made the expenditure.
According to MasterCard, the date of settlement is the "day that MasterCard determines the amount to be exchanged
between the merchant bank (acquirer) and the cardholder bank (issuer)." The merchant bank referred to here is the
bank of the merchant or the seller from whom you made a purchase and the acquirer is the bank or any financial
institution that issued your credit card. Various reports indicate that the settlement date is an average of
between 1 to 5 days from the date of the transaction.
Final Billing in Your Credit Card Statement
The MasterCard foreign exchange rate used the settlement date does not solely represent the amount being charged to
you as reflected in your credit card billing. MasterCard charges you a fee of 1% of the total amount of your
purchase. Depending on the nature of your credit card, your issuing bank charges you another 2.5% or whatever is
the fee for an overseas transaction inherent in your credit card.
The world has indeed come a long way. Who knows what MasterCard will do next as new and better electronic
technology is developed. Meanwhile, enjoy your planned trip to that place of your dreams - and have faith in the
MasterCard foreign exchange rate system.
Source: Credit Cards For People With Bad Credit Rating
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